Is Big Tech Driving the Market?

Thought of the Week / July 30, 2021

Three tech giants, Apple, Microsoft and Google owner Alphabet, reported combined profits of more than $50 billion in the second quarter of 2021. An earnings announcement is an official public statement to show a company’s revenues and expenses for the period, which ultimately determines their profitability. The purpose of releasing earnings reports is to provide the public with information on recent performance, financial position, and future outlook.
Apple (AAPL) reported sales of close to $81.4 billion, which is up 36% from this time last year. Google (GOOGL) reported advertising revenue of $50.44B, which is up close to 70% from this time last year. Microsoft (MSFT) posted revenues of $46.2Bm which is up over 20% from this time last year. Finally, Amazon (AMZN) posted revenue growth of 27% year over year later in the week, missing analyst expectations; however, the company’s earnings did beat analyst expectations.
The massive profits pouring into each company also illustrated why they have a combined market value of $6.4 trillion, more than double their collective value when the COVID-19 pandemic started 16 months ago. Apple, Amazon, Alphabet (Google), Microsoft and Facebook, the five largest publicly traded companies in America, now make up 20% of the stock market’s total worth.
This power comes along with a lot of controversy, and these companies have been hit with a series of lawsuits by the U.S government on charges they are “operating monopolies and abusing their power.” However, their dominance does not seem to be changing anytime soon, so it is important as investors to pay attention to their performance.
Despite the impressive earnings released Wednesday, AAPL closed that day down over 1%, MSFT was roughly flat, and GOOGL was down around 0.3%. As far as overall market response, the 3 major indexes were all down as of 10AM this morning, Friday, July 30th (NASDAQ down 0.59%, Dow Jones down 0.23%, and S&P 500 down 0.43%).

This week’s ups and downs highlight that impressive results may not always translate into immediate returns. This emphasizes the importance of sticking to a disciplined long-term approach when it comes to investing.

Chad Slagle

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