Snapshot

Video: Is Big Tech under threat?


While many businesses are struggling under the global lockdown, the largest technology companies are thriving. Firms such as Amazon, Microsoft, Apple, Google and Facebook have all seen increased demand for their digital services, as more people shop online and work from home. As a result, their share prices have vastly outperformed the US equity market.

But is their dominance ringing alarm bells? The tech giants have already faced a great deal of criticism over their anti-competitive behaviour and the pandemic has only intensified the scrutiny. The more powerful these firms become, the higher the likelihood of regulatory action being taken to supress their market control. History is replete with such examples.

At the same time, the US equity market is increasingly concentrated in just these five tech stocks.

Their combined market-cap (i.e. the total value of all of their outstanding shares) weighting in the S&P 500 index has more than doubled from roughly 8% in 2015 to 20% today.

A market this narrow should give some cause for concern. These narrow rallies tend to end when investors pile into the market leaders until they no longer justify their valuations, or when an economic recovery helps the laggards to catch up.

Either way, these firms may find it increasingly difficult to repeat their stellar market performance going forward.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Registered Office at 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

Contact Cazenove Charities

Achieving your charity's investment objectives takes time and thought. To find out how we can help you please contact:

James Brennan

James Brennan

Portfolio Director james.brennan@cazenovecapital.com