Duo Dominance – Apple and Microsoft’s Performance
There are some companies that completely dominate the stock market due to their sheer size and importance. For example, if that company were to report poor earnings, it would weigh down on the rest of the companies, especially on our indices that track the broader stock market. These businesses are often combined into commonly used stock acronyms, with FAANG being the most famous one. Composed of Facebook (now Meta Platforms), Apple, Amazon, Netflix, and Google (now Alphabet), these tech companies are some of the largest firms in the world, but some of them have started to stray away from the rest of the crowd.
In a time where tech firms aren’t doing as well, Apple and Microsoft have separated themselves to dominate the markets. Although Microsoft is not part of FAANG, it is the second-most valuable company in the world behind Apple, justifying its dominance. Data from Strategas Securities shows that the combined weighting of Apple and Microsoft in the S&P 500 is 13.3%, a historical figure for the index that almost every investor refers to when speaking about the market’s performance due to the variety of companies it tracks. The last time two companies matched this figure was back in 1978 between IBM and AT&T, and it spells an interesting pattern regarding the technology industry. At that time, IBM and AT&T had bright futures as the process of digitization was at its early stages, computers were continuing to improve, and the world was being introduced to the internet. Nowadays, Apple is continuing to be the most consistent tech business even in the wake of inflation, introducing new lines of iPhones, AirPods, Macbooks, and the technology inside of those devices. Microsoft is a more interesting case considering their strong link with ChatGPT, the generative AI platform from OpenAI that has shown the world what is to come with this new technology. It is a bit concerning that our indices might be leaning towards being top-heavy, but it’s an impressive feat from these two businesses.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.