With all that has been going on in 2020, it probably shouldn’t surprise us that the stock market has been a bit out of wack too this year. Whereas many investors dove headfirst into the at-home stock craze which saw the likes of Netflix (NASDAQ: NFLX), Peloton (NASDAQ: PTON), and Zoom (NASDAQ: ZM) soar to new heights, others jumped on the bankruptcy bandwagon of day trading — see Hertz (NYSE: HTZ) and JC Penney (NYSE: JCP).
Not that they were forgotten, but the Nasdaq’s (NYSEARCA: QQQ) finest — Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Google (NASDAQ: GOOG) — quietly continued to take over the world, meanwhile. The appropriately labeled ‘Big Tech’ giants are now all worth more than $1 trillion each following Google’s rally yesterday, July 6, which begs the question: should we all be investing in Big Tech now?
How far can Big Tech go?
Following Google’s addition to the trillion-dollar club yesterday, I was shown a pretty astonishing chart of Big Tech’s revenue. Though it is not in the exlusive club yet, Facebook (NASDAQ: FB) is considered part of Big Tech and is thus included in these stats along with the other 4.
In total, Big Tech generates $899 billion in revenue every year, which is equivalent to the GDP of the Netherlands. That’s a lot of money and it keeps growing, as shown in their average combined 12.19% increase in revenue between 2018 and 2019. Now, if you combined their market caps, we’d get a monstrous conglomerate worth $6.24 trillion, an almost inconceivable amount.
The scary thing about this is that these companies still have a lot to offer. Amazon appears to have gained a new lease of life in 2020 as Jeff Bezos’ cloud and e-commerce empire continue to dominate 36% and 39% of their respective global markets, dwarfing rivals such as Shopify (NYSE: SHOP), Mercado Libre (NASDAQ: MELI), and Alibaba (NYSE: BABA). Then there’s Apple which has only just begun diversifying away from the iPhone and into subscription services, which is growing every quarter along with its wearables division. Not to mention that it has moved away from Intel’s (NASDAQ: INTC) computer chips to build its own within its Macs.
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Microsoft’s cloud business is booming too, while Facebook looks set to be joining the e-commerce space in a big way with its Facebook Shops, which could open up its shop platform to almost 3 billion active members. And of course, there is also Google which is now worth more than $1 trillion as it corners the search and advertising space.
There is no limit to how far these companies could go as their offerings span over-the-top (OTT) media services, wearables, mobile devices, medicine, groceries, e-commerce, and so much more.
Is it too late to invest in Big Tech?
This is a question that crosses the minds of many new investors. The simple answer is that it is never too late to invest in these companies as evidenced in their growth in recent years. These companies make excellent buy-and-hold forever stocks for a couple of reasons:
- They’re mega-cap stocks ($500 billion+ valuation), meaning that their stock price movement is less prone to big swings up or down, the past few months notwithstanding.
- Their runway for growth, though slower than riskier stocks, is still long as each company pivots into new avenues of revenue generation as well as solidifying their own leadership in each sector of the tech industry.
Is there room for new members?
Right now it seems like the current crop of Big Tech stocks has secured their position at the table. However, who’s to say that other companies can’t come knocking? Netflix has been a Wall Street favorite, even being lumped in with the big boys via the FAANG acronym. However, there are two companies that I believe have a real shot at the big leagues in Tesla (NASDAQ: TSLA) and Nvidia (NASDAQ: NVDA). With similar sized market caps and stock growth of 303% and 1,892% respectively in the past 5 years, as well as a cult-like following, they’re my stocks to watch right now.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above Read our full disclosure policy here.
Editor at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.