Posted by London, UK: Big tech stocks including Facebook, Apple, Amazon, Microsoft and Google (FAAMG) accounted for over 60% market capitalisation growth in Q4, 2020.
A clear indicator of how these five big tech stocks have performed exceptionally well during a pandemic marred year. Even though COVID-19 crisis crippled economies globally, triggering recessionary impact with a mass downturn for almost the entirety of 2020, these tech companies’ business wasn’t much affected.
COVID-19 crisis and Market performance
The combined of these five big tech stocks FAAMG – Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOGL) have added $2.6 trillion in market capitalisation growth in Q4, 2020 – reported the research firm GlobalData.
Besides, 20 other tech stocks reported an increase in market capitalisation. India’s TCS (Tata Consultancy Services) and China’s Xiaomi are also among these 20 tech stock on the list of 25 top tech companies.
Compared to 2019, these 25 tech stocks reported a collective 47% gain in cumulative market capitalisation (MCap) in 2020.
Based on the data, it appears these five big tech stocks are sort of immune to pandemic led economic and social crisis. Or perhaps, did the pandemic some way helped these FAAMG stocks?
Changing Consumer Behaviour
According to Keshav Kumar Jha, the pandemic necessitated a change in consumer behaviour. “It led to an increase in demand for contact-less delivery, remote working, online classes and virtual diagnostic solutions, which benefited FAAMG stocks,” said Jha.
The pandemic trigged a massive change in consumer behaviour, though none had predicted the Coronavirus pandemic and its consequences. But the fact remains most global businesses give importance to consumer behaviour as part of their market strategies.
Probably, it is likely the case for these five big tech stocks as well. The offerings of tech companies include products and services that are highly consumer-driven. And it reflects in business decisions taken by these tech companies in recent year. Those decisions are in anticipation of changing consumer behaviour.
Business Decisions and Strategy
For instance, Amazon relies on an online strategy business. And it invests heavily in e-commerce operations in anticipation of growing online buying. Microsoft also follows a similar strategy. It has decided to close its physical store operations and focused online channels. It almost aligned with the changing behaviour and pandemic scenario.
The COVID-19 crisis compelled people, businesses and enterprises to adopt digital on a massive scale. People managed their essential needs through online purchase and education moved to online classes, while businesses and organisations relied on cloud-based services to support remote workforce and operations.
The demand for online services, collaborative and digital platforms increased the adoption of cloud. And it substantially helped companies like Amazon, Microsoft and Google.
These tech companies have anticipated and well understood the changing behaviour of people and businesses in advance. Perhaps, some companies like IBM late made strategic decisions but yet gained considerably.
For instance, IBM decided to spin-off its managed infrastructure services unit last year to focus on Open hybrid cloud platform. Though IBM announced this decision in October, it did boost investor confidence during Q4, 2020.
“Investors remained bullish as Alphabet, Facebook and Tencent – three major companies in digital advertising space – reported an increase in consumer engagement of services, mainly due to quarantine and shelter-in-place orders,” pointed out Jha.
“Tencent’s online advertisement and games businesses showed strong resilience during this most challenging time in recent history,” he added.
On the other hand, semiconductor majors Taiwan Semiconductor, Samsung, ASML, Broadcom, Qualcomm, Texas Instruments and Advanced Micro Devices (AMD) showed robust demands and performance during Q4. This pushed these tech stocks on the list of 25 top tech companies with higher market capitalisation.
“The health crisis led to an increase in demand for memory chips, mainly due to higher demand from cloud applications linked to remote working and online education,” explained Jha.
“The continued investment in artificial intelligence (AI), 5G infrastructure, datacentre, autonomous vehicles and gaming also kept the investors bullish on these stocks,” he added.
Only, Intel and SAP reported a decline in both quarter-on-quarter and year-on-year market capitalisation performance in Q4, 2020.
Intel failed to fast-track go-to-market its new generation chips. And this allowed its competition to penetrate in the personal computer microprocessor segment and threatened its market position.
While SAP failed to keep up investor confidence in 2020 because the company business outlook unmatched with its falling software-licensing business. The impacted SAP badly and suffered over 20% fall in market capitalisation in Q4.
“With the roll-out of COVID-19 vaccines, the chances of global recovery have improved. This will likely enhance the growth prospects of top tech stocks in 2021,” concluded Jha.
GlobalData list of 25 top technology companies undertakes market capitalisation performance. These include entities having hardware, software, IT services and mobiles devices business.