The combined market cap of FANGMAN stocks – Facebook, Amazon, Netflix, Google, Microsoft, Apple, and Nvidia – exceeded $7 trillion (R117 trillion) last week.
Tech stocks have enjoyed a strong rally since they hit their yearly low in mid-March, with most of these shares hitting all-time highs last week.
Holger Zschapitz, senior economic editor at Die Welt, highlighted that the value of these companies now equal to combined GDP of Germany, Italy, and Indonesia.
While this is not a like-for-like comparison, it illustrates just how valuable these large tech companies have become.
Many people would have expected the big tech companies and their share prices to suffer, like the rest of the economy, because of the COVID-19 pandemic.
This was not the case. Despite declines in February and March, the bounce-back for big tech was so rapid that it helped the Nasdaq composite and S&P 500 to erase their year-to-date losses in May and June respectively.
This may seem counter-intuitive, as the number of COVID-19 cases around the world continues to rise and economies continue to suffer.
Billionaire investor Bill Ackman explained that the pandemic affects companies differently, and large-cap companies with strong balance sheets are beneficiaries.
Ackman explained these tech giants make up a large percentage of market-cap-weighted indexes like the S&P 500 and Dow Jones, which explains the market recovery while economies continue to struggle.
“What the market does not reflect are small businesses, private companies, and leveraged businesses that don’t have access to capital and the same dominance as the public market,” said Ackman.
He explained the markets are a snapshot of a part of the economy instead of the whole economy, which continues to struggle.
“If you had an index of smaller businesses, the market would be down 50%, 60%, 70%, or even 80%,” Ackman said.
The image below, courtesy of Zschapitz, shows the combined market cap of FANGMAN stocks since 2016.
FANGMAN market caps
The table below shows the individual market caps of Facebook, Amazon, Netflix, Google, Microsoft, Apple, and Nvidia.
|Big Tech Companies|