Tech giants now make up more than 20 percent of the value of the entire S&P 500

Tech giants now make up more than 20 percent of the value of the entire S&P 500
Source: CNBC



While the global novel coronavirus pandemic has led to the demise of many small and medium-sized enterprises (SMEs), it has paved the way for greater dominance among large tech companies, whose success has just been further highlighted during the outbreak.

Although the earnings of these major companies are yet to be released, it is reported that the most valuable companies within the United States – Microsoft, Apple and Amazon – have all seen their stock values climb a total of three-quarters of a trillion dollars since the recent market low. This is more than the combined gain of the bottom half of all stocks in the S&P 500 Index.

According to Thomas Philippon, a professor of finance at New York University, “the firms that were the top dogs going into the crisis also happen to have the most resilient business models because they can do everything online.” The tech giants also sit on large piles of cash, which put them in a relatively protected position.

The popularity among tech companies has surged during global lockdown regulations. Amazon has embarked on multiple hiring sprees to cater for the unprecedented levels of online demand. Netflix has added 16 million new subscribers during the first quarter of this year. TikTok’s parent company ByteDance has placed 10,000 new jobs to meet the rapid popularity surge of the self-recording video app.  

In response, Jeb Breece, principal and portfolio manager at money management firm Spears Abacus, has said: “What you saw in ’08, ’09 was the companies that were able to continue to invest came out the other side and actually accelerated their growth relative to competitors… And I think that probably happens again.”

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