In a recent article, the New York Times outlines how a shrinking economy and the world in turmoil due to the Wuhan coronavirus pandemic has actually helped Silicon Valley tech giants to further amass their wealth and influence.
In a recent article titled “Big Tech’s Domination of Business Reaches New Heights,” New York Times reporters Peter Eavis and Steve Lohr outline how Silicon Valley tech giants have benefited greatly from an unstable economy and a worldwide pandemic in recent months. According to the Times, the Masters of the Universe are in a “position to dominate American business in a way unseen since the days of railroads.”
Eavis and Lohr write in their article:
A rally in technology stocks elevated the S&P 500 stock index to a record high on Tuesday even as the pandemic crushes the broader economy. The stocks of Apple, Amazon, Alphabet, Microsoft and Facebook, the five largest publicly traded companies in America, rose 37 percent in the first seven months this year, while all the other stocks in the S&P 500 fell a combined 6 percent, according to Credit Suisse.
Those five companies now constitute 20 percent of the stock market’s total worth, a level not seen from a single industry in at least 70 years. Apple’s stock market value, the highest of the bunch, is nearly $2 trillion — double what it was just 21 weeks ago.
The tech companies’ dominance of the stock market is propelled by their unprecedented reach into our lives, shaping how we work, communicate, shop and relax. That has only deepened during the pandemic, and as people shop more frequently on Amazon, click on a Google or Facebook ad or pay up for an iPhone, the companies receive a greater share of spending in the economy and earn ever larger profits. This is why investors have flocked to those stocks this year at the expense of the scores of companies struggling in the health crisis, and are betting that their position will be unassailable for years.
Thomas Philippon, a professor of finance at New York University, told the NYT: “Covid was the perfect positive storm for these guys.” Daily visits to platforms such as Facebook and YouTube increased drastically in March, right when stay-at-home orders went into effect. Facebook saw a usage increase of 15 percent while YouTube saw a 10 percent increase according to online data provider SimilarWeb.
Amazon’s stock is up over 50 percent from its pre-pandemic price showing how much investors believe they have benefited from the disruption of regular retail chains. Jonathan Welburn, a lead author on the RAND study, commented that during the pandemic web users may work via Slack, call people via Zoom, order food on DoorDash, and watch a movie on Netflix.
What these companies have in common is that they all run on Amazon Web Services. “Amazon is a very central digital hub, and it epitomizes the direction our economy has taken,” Welburn said. Cloud computing has become vital in the work-from-home age, global spending on cloud technology rose 33 percent to more than $30 billion in the second quarter of 2020 according to Synergy Research.
Eavis and Lohr ended their article commenting on what the future may hold as these tech firms grow in power and influence:
Of course, the searing rally in the stocks could be the result of excessive optimism and the stocks could fall. But if the Big Five keep reporting huge profits, they should still make up an outsize share of the overall market. In the 12 months through the end of June, they earned nearly $500 million a day in net income combined.
“The stock market has the great advantage that it’s looking at the stream of future profits,” Mr. Philippon said. “They think they are high today — and going to remain very high in the future.”
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