Morning Markets: The five largest American tech companies are once again worth $4 trillion. Let’s remember when we last crossed this threshold.
Before the markets opened this morning, the five largest American tech companies were worth a combined $4 trillion dollars. It’s a notable financial landmark, but the group’s collective reaching of the threshold is not their first; we’ve been here before.
Looking back, I can actually draw you a bit of a line through our coverage on the path that Facebook, Alphabet, Microsoft, Apple, and Amazon (the Big Five) have taken to reach a $4 trillion shared market cap, lose it, and now regain it. (A quick word: Our spreadsheet that tracks this sort of thing does round up and down gently, so we’re discussing thresholds here within a billion dollars or two. Let’s not get caught up in the small when we’re discussing the large).
So, here’s a chronology of sorts:
- May 2017: Morning Report: The Hunt For $3 Trillion. At this date, the Big 5 were worth just under $3 trillion.
- June 2017: Tech’s 5 Biggest Players Now Worth $3 Trillion. In mid-2017, this felt like a peak of sorts. How wrong that emotion was.
- July 2018: The Big 5 Are Worth $4 Trillion Heading Into Earnings. Roughly a year later, the same set of companies had added a collective trillion dollars to their market cap. At this point, a return to $3 trillion would have been a huge slide in value!
- Later July 2018: Big 5 Slip Under The $4 Trillion Mark As SaaS And Social Tech Stocks Also Sell Off. Quickly, things got choppy.
Things then went south for a bit. As we can see in the following Wolfram Alpha chart of the firms’ shared worth, the downturn for the biggest of tech shops was material in late 2018. Those declines have also been nearly erased:
So, we’re back, just not all the way to the top. (For reference, Wolfram Alpha has the shared market cap of the Big Five at $3.983 trillion, so we’re not rounding much by calling this $4 trillion.)
So what? Let’s talk about it.
Crunchbase News spends its days thinking about private markets. But there are notable connections between the public and private markets. Mostly, the public markets impact the private markets by determining sentiment around pricing. This happens through changing equity values (giving public market revenue multiple comps to startups), and acquisitions. The latter also providing pricing guidance that the private markets can use to reprice illiquid securities.
Acquisitions can also become more attractive in high-times. Companies that see their public-market value rise have more flexibility to buy other companies; using equity to make deals feels cheaper when your value rises, giving you more money to play with, lowering effective dealmaking costs. So, when the value of the Big Five rise, it lets us know about the health of the public tech market (pretty darn strong), in a way that lets us better understand the private markets.
Sunlit uplands, everyone, it’s 2019.
Illustration: Li-Anne Dias.