- Apple and Microsoft accounted for over 50% of the valuation gain of top 25 tech stocks in Q4
- Rising inflationary pressures worldwide could end winning streak of tech stocks
Amid rising Omicron variant fears and supply chain issues, the top 25 *technology companies added another $1.8 trillion in market capitalization (MCap) in Q4 2021, according to GlobalData. The leading data and analytics company notes that the top four—Apple, Microsoft, Alphabet, and Amazon—accounted for 65% of the valuation gain.
Keshav Kumar Jha, Business Fundamentals Analyst at GlobalData, comments: “Apple and Microsoft not only maintained their $2 trillion valuation tag, but each stock added over $400 billion in MCap in Q4. With over $100 billion of cash flow, Apple’s continuous capital return through share repurchase programs helped to establish the iPhone maker as one of the safest stocks to invest in.”
Investors also remained bullish on Microsoft’s stock, largely attributed to its growing cloud services business. Revenue for Azure, the company’s cloud solution, grew 50%, which also enabled it to clock 22% revenue growth in first quarter of FY2022.
Alphabet’s improving financial performance, led by Google advertising and its Google Cloud businesses, successfully retained investor interest in the company. The company, in its Q3 earnings report published in October, reported a 43% increase in Google advertising revenue and 45% growth in Google Cloud revenue, which helped its stocks soar during Q4 2021.
Jha continues: “Notwithstanding global supply-chain issues and increasing operational costs amid labor shortages and rising labor costs, Amazon’s stock grew around 2% in Q4 2021. Although the online store sales slowed down, its cloud business registered 39% growth in revenue in Q3 FY2021.”
Although Facebook’s rebranding to Meta and its focus on metaverse technology helped the company to gain some traction in November, concerns related to Apple’s iOS privacy changes continued to affect investor confidence in its stocks.
Tencent’s valuation continued to decline in Q4 as investors ditched the company amid the Chinese government’s increased scrutiny of the top tech companies in the country.
Meanwhile, major semiconductor companies, including NVIDIA, Taiwan Semiconductor, Samsung, ASML, Broadcom, Qualcomm, AMD, and Applied Materials reported a growth in their MCap in Q4.
However, the concern related to the global shortage of chips and supply-chain issues impacted the performance of these stocks in Q3. Investors remained bullish on semiconductor stocks in Q4 due to high global demand of chips from manufacturers across sectors.
Jha concludes: “With increasing demand for digitalization and automation, the tech companies could keep generating profits for investors. However, factors such as rising inflationary pressures, intensifying regulatory scrutiny, and supply chain disruptions caused by the pandemic could restrict tech stocks bull run in 2022.”
*Technology companies include software and hardware developers, IT service providers (including internet-based service providers), and manufacturers of electronics, including semiconductors, mobile devices etc. GlobalData ranks the Top 25 companies based on MCap performance.
