Investment Explained: What you need to know about FAANGS, which is short for Facebook, Amazon, Apple, Netflix and Google, US tech giants
In this series, we break down the jargon and clarify a popular investment term or topic. Here is FAANG.
Why do we discuss vampires?
We’re not – it’s an acronym that stands for Facebook, Amazon, Apple, Netflix and Google, the five tech giants in the US.
Facebook is now called Meta Platforms and Google is now called Alphabet, but you get the idea.
When Jim Cramer, host of CNBC’s Mad Money show, coined the acronym in 2013, it was “Fang,” and then Apple added it in 2017.
Take a Stake: Faang is an acronym for Facebook, Amazon, Apple, Netflix, and Google, the five tech giants in the US
Why is the acronym used so often?
Mostly because it represents the technology sector, whose fortunes have dominated the direction of stock markets over the past decade, reflecting the shift to the Internet during that period. These companies also make up a large portion of many portfolios, and are the largest holdings in several funds that are popular with private investors.
The combined market value of Faangs is around $8tn (£6.4tn), of which £2.1tn is for Apple.
Why not Microsoft?
Back in 2013, Microsoft seems to have considered technology a bit outdated, even though its renaissance was just beginning. Cramer recently revised the acronym to include the resurgence of Microsoft and to take into account the new names of other companies.
The updated version is Mamaa – Meta, Alphabet, Microsoft, Amazon and Apple. Note the exclusion of Netflix, whose market value has shrunk due to declining subscriber numbers.
Will he come across the new abbreviation?
It has not happened yet. One reason for this may be the link between the word “canine” and the realization, in many quarters, that the influence wielded by the tech giants was pernicious and needed to be curbed: Mama might sound too cute.
Governments are under pressure to reduce the influence of big tech companies. The EU Digital Markets Act is designed to counter their power.
How are the fangs doing lately?
These are unhappy times for members, who were kings of the markets in 2020 and 2021, when lockdowns dramatically increased global reliance on their products and services. Its share price has been hurt by the reopening of the economy, concerns about increased regulations and fears that interest rates will rise to fight inflation. Much of its appeal lies in future earnings. But these are less attractive if more generous returns are offered from other investments.
How far did they fall?
Since the beginning of the year, Alphabet, Amazon, and Apple’s prices have fallen by 20 percent, 11 percent, and 16 percent, respectively.
Meta is down 47 percent, due to lower ad revenue and lower usage of Facebook and Instagram. Netflix performed the worst – down 69 percent.
No wonder Kramer tweeted this week that he’s “not a big fan of Fang.” But someone who has owned, say, Apple shares since 2017 couldn’t be too unhappy. The price is 339 percent higher than it was at the time.
What then?
They may no longer be the darlings of the stock market, but their influence on many aspects of our lives continues.
There are moves to replace the components of the abbreviation with the following sectors: fuel, agriculture, space, nuclear (and renewable) energy, gold and other metals. These previously unfashionable investments fared better this year and are expected to do so for a while.
