Apple, Microsoft and (briefly) Amazon have all pulled it off. On January 16th Alphabet, Google’s parent company, became the fourth American company ever to have a market capitalisation of $1trn. Big Tech shares have continued to soar after a banner 2019, during which the quartet gained 46% in value, outpacing even America’s frothy stockmarket. Apple’s capitalisation has more than doubled since the start of last year, to $1.32trn. Add Facebook, and America Inc’s five most valuable firms have gained a cumulative $1.8trn in that period. Surely this cannot go on?
Maybe it can. The tech giants have continued to mint money despite President Donald Trump’s tech-infused trade war with China (a big manufacturer for Apple and Microsoft, as well as a large market). And they have so far survived controversies at home over abuses of user privacy (Facebook) or market power (mostly Alphabet, Amazon and Facebook).
Their full-year earnings reports, kicking off with Microsoft’s on January 23rd, will show as much. In the third quarter of 2019 the five firms’ cumulative net income totalled $40bn. A gusher of online-advertising dollars that fuels Google and Facebook shows no sign of petering out. Nor do the billowing cloud-computing businesses of Microsoft and Amazon. Apple has managed to offset falling iPhone sales with higher revenues from services (including a fresh video-streaming service) and must-have accessories such as its wireless earphones (it sold 67m pairs of AirPods in 2019).
Having entered and then fallen out of the $1trn gang in 2018, Amazon could rejoin it. After years of sacrificing profits on the altar of future growth, the e-commerce goliath generated $24bn in free cashflow in the 12 months to September, compared with $15bn the year before. All told, the five tech giants raked in $166bn in free cashflow.
Investors are betting that more of this will be shovelled to shareholders, starting with Alphabet. A new chief executive, Sundar Pichai, took over from Google’s founders, Larry Page and Sergei Brin, in December. Analysts expect him to be friendlier to shareholders—and less wary of dividends, which Alphabet may even begin paying out on his watch.
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