Analysts were warning investors to diversify their portfolios and avoid being too narrowly-focused.
Fast forward and over the past year the aggregate market capitalisation of these tech giants, and Google’s parent Alphabet, has jumped by 45% or almost $1.3 trillion, despite earnings affected by a smartphone market which is saturated and companies seeing much slower upgrade cycles. The effect of the Trump tax cuts, which helped to boost earnings in 2018, is also now wearing off.
Despite these pressures, most analysts and investors expect to see similar rates of growth in the coming year and, in fact, last week Google’s parent company, Alphabet, joined an illustrious group of companies achieving a market capitalisation in excess of $1trillion.
For most analysts the only way for these companies is up – many are talking of the tech giants doubling their current market valuations.
These companies are able to invest heavily in technology and with the vast amount of data that they have accumulated from billions of users, they can now look to reach into and revolutionise almost every aspect of our lives.
It’s that prospect that makes so many investors believe that these companies are actually significantly undervalued.
So, what are the risks? The biggest appears to be regulatory, because as these companies have grown so too has their influence on society and that is now becoming a major concern for regulators. There is talk of a need for a new framework, a new vocabulary, to assess and address their dominance.
In Europe, Google has been hit with a $9bn fine for breaking antitrust laws while Apple was forced to repay $14.5bn for avoiding taxes.
France and the UK have brought forward tech tax proposals. While France has postponed its implementation the UK has said that it will go ahead with a new tax in April, despite US threats to impose tariffs in retaliation.
Consumers are also joining in the calls for tighter scrutiny of the use of data especially in terms of social media advertising.
Whatever happens, in terms of regulation, these companies seem destined to become even larger as they lay the foundations to become even bigger and more intrusive than they are today.
