Apple saw its market capitalization cross the $3 trillion threshold. The iPhone maker has reached that milestone before, but has never managed to hold it to the end of a trading day.
But this morning, with its shares up 1,4% and a significant $20.000-30.000 billion above the milestone, it looks like the company is on its way to finally getting there.
Less than five years ago, the "Big Five" (Apple, Alphabet, Amazon, Facebook, and Microsoft) had a combined value of $3 trillion. It's amazing how big a difference a few years can make.
Passing the radar on tech and startups shows just how much tech stocks have rallied this year. As CNBC wrote, the Nasdaq's performance in the first half of 2023 could "be the strongest index since 1983." For startups, rising stock values technological is slowly increasing revenue multiples, which reduces pressure on future fundraising because its comparable companies on the public market are now worth more.
Apple has certainly benefited from this recent recovery. Its shares are up just over 45,5% year-to-date.
While Apple's rise is notable, there has been a major shakeup in the ranks of the biggest tech stocks. It's time to update our acronyms and understand what the required changes tell us about the state of the world.
Eliminating the FAANG from the Big Five
The technology industry is too broad to discuss collectively. This is doubly true today, as previously technological methods of doing business, such as E-commerce and mobile devices, have become the norm, expanding the list of "tech" companies to a ridiculous breadth.
Professionals have created smaller, simpler groupings of tech companies to discuss market dynamics and, in a sense, who's hot at any given time.
The term FANG, which refers to Facebook, Amazon, Netflix, and Google, has been around for a decade or so. A certain CNBC host, who appears to be one of its early supporters, later added Apple to the list. The grouping began to occupy more space in the minds of consumers in 2016, and the search volume of FAANG it peaked in early 2022. Since then, it has been on the decline.
Another way to group tech stocks is by their absolute value, in other words, their market capitalization. I have long preferred this approach for tracking the largest tech companies, and since 2017 I began tracking the most valuable tech companies at the time (Meta, Apple, Amazon, Microsoft, and Alphabet) as a group when they reached a value of $ 3 billion and later reached $4 trillion in 2018.
Now, however, that list is a bit dated.
Changes in the BigTechs group
Markets move around a lot, but a good benchmark of a truly dominant tech company is when a company breaks the $1 trillion market capitalization threshold on its own, without investors or external VC future valuations.
That yardstick came in handy when Tesla surpassed that mark in late 2021, before losing about two-thirds of its value in early 2023. The company has since rebounded and is now worth more than $800 billion.
However, that's not enough to make the EV maker a top five tech company. Again, that's the problem with the "tech" label in today's marketplace. This is the current list:
- Apple: $3 trillion dollars
- Microsoft: $2,53 trillion
- Alphabet: $1,54 trillion
- Amazon: $1,33 trillion
- Nvidia: $1,04 trillion
Those figures add up to $9,44 trillion dollars.
This is very close to $10 trillion or if it is written: $10,000,000,000,000. If you were to create a stack of ten trillion $1 bills, it would be high enough to stretch from Earth to the Moon, back to Earth, and almost back to the Moon again. It's a lot of cash.
But the list is more than just a parlor trick. It's actually quite useful.
- FAANG was: Facebook and Netflix were on the list, as they were much more disruptive companies at the time. Netflix was breaking the rules of digital content and Facebook was still in its glory years of growth. They were big, muscular and rising.
- The Original Big Five: this list, which is remembered, came later, it was more sober but still included a social media company. It had no chip makers. The largest tech companies were broad enough to escape being classified in a single category, but at the time they were waging the public cloud war.
- The new Big Five: Today, social media has been removed from the list to make room for a chipmaker that has an important role to play in the AI race. Microsoft, Alphabet and Amazon, the public cloud giants, will also have a similar influence these days. In fact, the only outlier on this new list is Apple. A mostly consumer hardware and software company outperforming mass enterprise and public cloud competitors? Apple, who likes to say ML instead of AI and wants to sell you a watch?
The fact that Apple and Nvidia together now account for 40% of the world's most valuable tech companies is proof that you can still do good just by building things. It also shows that pure software is not the only way to generate titanic amounts of profit.
More interestingly, this update to the list of top technology companies can serve as an indicator of the space in which the current market expects to generate the most value in the coming years. The change from the original Big Five could be this new list: MANAA? – it's essentially market forces showing where the most value is being created today. That value comes primarily from AI and the cloud.
It is also exciting that the reaction of prices to changing market realities creates more competition and therefore more innovation and value for money invested. This is precisely what the Chinese government is trying to do by decree, except that without a Grand Fund.
