The combined profits of the top U.S. technology companies last year surpassed the combined profits of companies listed in almost all other G20 countries, new research shows.
A Deutsche Bank analysis found that the profits of Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla greatly eclipsed the wealth accumulated by the group’s foreign companies, which in turn account for 75 percent of global trade.
Only China and Japan had higher returns than the “Magnificent Seven” when all their gains are combined. Still, Deutsche showed that Mag 7’s market capitalization would make it the second-largest stock exchange in the world, with Japan in fourth place.
The ‘Magnificent Seven’ earned average returns of 107 percent in 2023, according to wealth manager Evelyn Partners, quickly outperforming the MSCI USA index of other large- and mid-cap market segments, which returned just 27 percent on last year.
It is a welcome relief for Big Tech, which struggled during the pandemic as customers rejected advertising, before inflationary pressures led to record job cuts across the industry.
The top seven companies delivered surprising returns last year, outshining much of the G20
According to one analysis, the market capitalizations of Microsoft and Apple alone are individually similar to the combined capitalizations of all companies listed in France, Saudi Arabia and the United Kingdom.
Microsoft has been in the top five since 1997, excluding a four-month interregnum, and Apple since 2009, CNBC. reported.
But the group also includes newcomers like Nvidia, which jumped to the top in the first half of last year.
Now a global leader in AI computing, Nvidia’s rise reflects advances in AI technology and the demand for innovative new tools in modern businesses.
Since the beginning of the year, the company’s shares have risen an astonishing 47 percent.
Elsewhere, OpenAI, behind ChatGPT, reached a valuation of $80 billion following a deal with Microsoft-backed Thrive Capital.
And the United States backed semiconductor maker GlobalFoundries with a $1.5 billion grant to produce the technology domestically.
Part of the meteoric rise of these companies is attributed to interest rate cuts after months of policies aimed at curbing inflation until 2022.
Still, analysts warn of risks to the American success story. Jim Reid, head of global economics and thematic research at Deutsche Bank, said the US stock market is “rivaling 2000 and 1929 in terms of being the most concentrated in history.”
Travis Oglesby, senior wealth advisor at Avidian Wealth Solutions, wrote on LinkedIn: ‘On the one hand, we should be proud of American innovation. On the other hand, it scares me a little how powerful and big these few companies have become.’
While some have achieved surprising success, it is notable that Elon Musk’s Tesla has fallen from one of the five most valuable companies in 2021/22 to tenth place in just over a year.
Forbes reported At the beginning of 2024, Tesla had seen its profits fall by 23 percent after “a series of price cuts for its cars.”
The company’s gross margin in the fourth quarter of last year fell 17.6 percent to its lowest level since 2019.
‘At the margins, the Mag 7 has some volatility around the position of its members, and its overall valuations can be questioned, but the core of the group has been the largest and most successful companies in the US and, with of the world for many years. now,” Reid added.
Changes in the market have seen the dominance of ‘FAANG’ – Facebook (parent group Meta), Apple, Amazon, Netflix and Google (parent group Alphabet) – supplanted by the Magnificent Seven, replacing Netflix with Nvidia.
“MnM? “Microsoft, Nvidia and *now* Meta are leading the AI era,” Raymond James analyst Josh Beck said in a note to clients earlier this year.
Earlier this month it was reported that Microsoft had overtaken Apple as the world’s largest company, reaching a share value of $405.
Nvidia was up 44 percent at $693, and Meta, formerly Facebook, was up 33 percent at $459.
eToro’s Bret Kenwell said: ‘It’s been a fantastic period for the so-called “MnM” trio: Microsoft, Nvidia and Meta.
‘Meta and Nvidia are up about 30 percent and 40 percent so far this year and about 145 percent and 220 percent over the past year, respectively.
“Microsoft hasn’t been far behind either, with an increase of almost 60 percent in the last 12 months.”
Tesla has overcome some challenges in recent years, but remains a top 10 US technology company.
Only China and Japan in the G20 offered returns higher than those of major US technology companies.
The group also includes Argentina, Australia, Brazil, Canada, France, Germany, India, Indonesia, Italy, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the United Kingdom.
Deutsche also recently noted that India became the world’s fastest growing major economy while holding the G20 presidency until 2023.
In August, the country became the fourth to land a moon landing with its Chandrayaan-3 spacecraft.
About 60 percent of India’s 1.3 billion people live on less than $3.10 a day, the World Bank’s average poverty line.