The tech companies in the United States are responsible for most of the comeback we have seen in the stock market. Surely, the Fed’s decisions help, but none of the big tech companies disappointed when releasing the earnings during the pandemic.
In fact, it would be appropriate to review what big tech, what the Internet does to our society, and what its role is – just to put things into perspective. Everyone heard of companies like Amazon, Google, or Microsoft – but does everyone really understand the size of the businesses these companies run?
Details About the Big Tech Sector
In the late ’90s, the tech bubble created one of the deepest recessions known to the developed world. It took another decade until the 2008-2009 financial crisis hit the Western world, and many market participants feared investing in tech stocks for a long time.
Nowadays, tech stocks are back with a vengeance, and for a good reason. The industry changed, mass adoption exceeded all expectations, and the big tech sector now accounts for 45% of the S&P500. Moreover, the sector is responsible for approximately 15% of the world’s GDP. Judging by both metrics, the levels are higher than in the late ’90s. For this reason, many cautious investors today call for a new bubble forming.
However, a quick look at the numbers behind the sector reveals a totally different picture. For instance, every minute, Amazon ships over 6,600 packages. Or, there are over 1.3 million video calls people made every minute of the day. Moreover, consumers spend a million dollars online every single minute of every single day. Many other examples exist, but I guess by now you have got the picture.
It is hard to argue with such numbers. What is even more interesting is that most of the investors in the tech sector are not familiar with the size of the businesses they are buying. Instead, they simply own or speculate on the value of a stock because it is popular.
However, the big tech names became popular among consumers because of the increased Internet mass adoption. Which appears as though it is not going to go anywhere anytime soon.
Internet penetration trends reveal that more and more people will be online in the years to come. As the Internet gets into the most remote places, the number of users is poised to increase. Also, pandemic changed consumer behavior. We spend more time consuming online goods and services than before – another boost for the tech sector.
Therefore, it would not only be unfair to compare the 2020 tech sector’s performance with the one in the late ’90s. It would also be totally wrong.