Today, Apple saw its market cap pass the $3 trillion threshold. The iPhone maker has reached that landmark before but has never managed to hang on to it through the end of a trading day.
But this morning, with its shares up about 1.4% and a significant $20 billion to $30 billion above the milestone, it seems the company is on pace to finally pull it off.
Less than five years ago, the “Big Five” — Apple, Alphabet, Amazon, Facebook, and Microsoft — was worth a combined $3 trillion. It’s striking how much of a difference a few years can make.
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Flying somewhat underneath the radar in tech and startup land is just how far technology stocks have rebounded this year. As CNBC wrote this morning, the Nasdaq’s performance in the first half of 2023 could “be the strongest for the index since 1983.” For startups, the rising value of tech stocks is slowly lifting revenue multiples, which reduces the pressure on future fundraising because their public market comparable companies are now worth more.
Apple has certainly benefited from this recent recovery. Its shares rose a little more than 45.5% so far this year as of Thursday’s close.
While Apple’s ascent to this milestone is notable, there’s been a greater reshuffling 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.
De-FAANGing the Big Five
The tech industry is too broad to discuss collectively. This is doubly true today as previously tech-forward methods of doing business, like e-commerce and mobile, have become the norm, expanding the list of “tech” companies to ludicrous breadth.
So, folks have come up with smaller and simpler collections of tech companies to discuss market dynamics and, in a sense, who is hot at any given moment.
The term FANG, referring to Facebook, Amazon, Netflix and Google, has been around for a decade or so at this point. A certain CNBC host, who appears to be one of its earliest proponents, later added Apple to the list. The grouping began to occupy more space in consumer’s minds in 2016, with search volume for FAANG peaking around early 2022. Since then, it’s been in decline.
Another way to group tech stocks is by their sheer worth — their market capitalization, in other words. I have long preferred this approach to tracking the biggest tech companies, and so in 2017, began tracking the most valuable tech companies at the time — Meta, Apple, Amazon, Microsoft, and Alphabet — as a group when they became worth $3 trillion, and when they reached $4 trillion in 2018.
Now, however, that list is a bit passé.
A changing of the guard
The markets move around a lot, but a good benchmark of a truly dominant tech company is when a company passes the $1 trillion market cap threshold all by itself.
That measuring stick was useful when Tesla passed that mark in late 2021, before losing around two-thirds of its value in early 2023. The company has since rebounded and is now worth more than $800 billion.
That, however, is not enough to make the EV manufacturer a top-five tech company. Again, see the issue with the tech label in today’s market. Here’s the current list:
- Apple: $3 trillion
- Microsoft: $2.53 trillion
- Alphabet: $1.54 trillion
- Amazon: $1.33 trillion
- Nvidia: $1.04 trillion
Those figures add up to $9.44 trillion, in case you wanted to know.
That’s damn close to $10 trillion, or, if you write it out: $10,000,000,000,000. If you created a stack of ten trillion $1 bills, by our calculations, it would be tall enough to stretch from Earth to the moon, back to Earth, and nearly back to the moon again. It’s a lot of cash.
But the list is more than just a mere parlor trick. It’s actually quite useful. Observe:
- FAANG era: Facebook and Netflix were on the list, as they were far more disruptive companies at the time. Netflix was ripping up the rules of digital content, and Facebook was still in its glory years of growth. They were big, muscular and on the rise.
- Original Big Five: This list, which came later by my recollection, was more sober but still included a social media company. It featured no chipmakers. The biggest tech businesses were broad enough to escape being classified into a single category, but they were fighting the public cloud war at this point.
- New Big Five: Today, we’ve pushed social media out of the list to make space for a chipmaker that has a big role to play in the AI race. Microsoft, Alphabet and Amazon, the public cloud giants, similarly will influence these days as well. In fact, the only outlier in this new list is Apple. A mostly consumer hardware and software company beating the mass enterprise plays and public cloud competitors? Apple, which likes to say ML instead of AI and wants to sell you a watch?
The fact that Apple and Nvidia together now make up 40% of the most valuable tech companies in the world is proof that you can still do well by simply building stuff. It’s also evidence that pure software is not the only way to build titanic amounts of wealth.
More interestingly, this refresh of the list of the top tech companies can serve as a proxy for the space that the market currently expects to generate the most value in the coming years. I would argue that the shift from the original Big Five to this new list — MANAA? — is essentially market forces showing where the most value is being created today. That value is mostly coming from AI and cloud.
It’s also exciting that the price reaction to changing market realities will engender more competition and therefore more innovation and value for our buck. It’s precisely what China’s government is trying to do by fiat, just without a Big Fund.
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