The consistent and continuous progress of technology has changed the way people live their lives. Along the way, technology has also upended industries and disrupted the status quo. Some of the prominent technology changes that have shaped our world in the past few decades include:
- Personal computer
- The Internet
- Cloud Computing
- Social Media & more.
The companies that have managed to catch the bull by its horns and successfully ride the waves of technology advancement now dictate the list of the largest tech stocks. These leading tech stock companies are a mixed bag.
The 10 leading U.S. tech stocks co mbined command a market capitalization of over $5 trillion and the excess revenue they generate alone aggregates to $1.2 trillion.
As per Patti Domm, “Big cap technology stocks hit an all-time high Tuesday, aided by a rebounding semiconductor sector amid some signs of progress in the trade war between the U.S. and China.” 2
The 5 Biggest Tech Stocks
Many of the largest companies in the United States are now part of the technology sector with some having values in the neighborhood of $1 trillion. The people who took the plunge and invested in the best tech stock are likely enjoying exceptional returns.
Here are the largest U.S. tech stocks, as of the end of the first half of 2019.
Company Microsoft (NASDAQ: MSFT)
Market Capitalization $1.027 trillion
Revenue (TTM) $122.2 billion
Net Income (TTM) $34.9 billion
Although Microsoft was not the first U.S. public company to be valued at $1 trillion, it has stood the test of time and now stands alone in the trillion-dollar club at the end of the first half of 2019. Microsoft’s cloud computing business’ success and their resilient office software suite enabled Microsoft to generate $122 billion in yearly revenue. This impelled the company to the top of the tech stock heap.
As per Stephen Grocer, “Apple got there first, then Amazon, and on Thursday, Microsoft became the third American company to reach a market valuation of $1 trillion.
It was a brief achievement (Microsoft was valued at about $990 billion by the end of the day), but it underscores the remarkable recovery in technology stocks since their precipitous decline late last year.” 3
One of the primary reasons for Microsoft stock to soar in the last few years was Microsoft’s Azure cloud platform. Microsoft has carved out a solid second position in the cloud infrastructure market after Amazon Web Services in terms of market share.
Company Amazon (NASDAQ: AMZN)
Market Capitalization $932.3 billion
Revenue (TTM) $241.5 billion
Net Income (TTM) $12.0 billion
The greater part of Amazon’s revenue comes from its e-commerce operation, and that is not likely to change. However, Amazon web services’ (AWS) cloud computing business has grown into a large tech company. In the last year alone, AWS has generated a staggering $27.9 billion in revenue and it is considered the most profitable part of Amazon’s business, with an operating margin close to 30%.
Although Amazon’s direct online sales growth rate has decelerated to a little more than 10%, revenue spawned from third-party sellers is increasing at roughly twice that rate. Revenue from subscription services, like Prime, is also growing much faster.
Company Apple (NASDAQ: AAPL)
Market Capitalization $910.6 billion
Revenue (TTM) $258.5 billion
Net Income (TTM) $57.2 billion
Apple has an installed base of 1.4 billion active devices, which includes iPhones, iPads, Macs, and Apple Watches. Services like Apple Music have also grown to tens of millions of subscribers. The company produced $11.5 billion in services revenue in the second quarter of fiscal 2019, placing the annual run rate around $45 billion.
However, the U.S. smartphone market has reached a saturation point, and Apple is suffering from a slump in the demand for its iconic devices. iPhone sales contribute heavily to the revenue, even a slight decline in iPhone demand causes a dent in the revenue that will be tough for Apple to fill with services.
Company Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)
Market Capitalization $750.4 billion
Revenue (TTM) $142.0 billion
Net Income (TTM) $30.0 billion
Alphabet’s advertising brings in more than 85% of revenue, however, the company has a presence in a wide variety of areas. Alphabet competes with the big wigs, Microsoft’s productivity software market & cloud computing, and Amazon’s e-commerce. All these businesses are part of the Google bracket. Apart from this, Alphabet has several small businesses it refers to as “other bets.”
The “other bets” businesses generated only $595 million in revenue in 2018, losing $3.36 billion on an operating basis. Meanwhile, Google itself generated $136.2 billion in revenue with an operating profit of $36.5 billion. The company’s stock price is reinforced by the profitability of the company’s core advertising business, along with the potential for a few of the “other bets” becoming profitable in the years ahead.
Company Facebook (NASDAQ: FB)
Market Capitalization $550.9 billion
Revenue (TTM) $58.9 billion
Net Income (TTM) $19.5 billion
Revenue for the social media giant is currently recorded at $55.9 billion over the past 12 months, while net income is approximately $20 billion. The development of the core Facebook platform and the acquisitions of Instagram and WhatsApp have boosted the company’s results. Most of Facebook’s revenue is from selling advertising. The company also sells various hardware products and processing payments for the same generates some revenue.
It will be very difficult for a competitor to overthrow Facebook as the king of social media. Even a never-ending surge of privacy issues hasn’t derailed confidence in Facebook. However, this could still be harmful in the long run.
According to Stephen Clark, “Taking the time to do the full research can help offset the jitters associated with picking stocks. Finding stocks that still have room to head higher can be tricky, but there are still plenty of them out there. Although nobody can say for certain which way the market will trend into the New Year, investors should be on the lookout for opportunities that may present themselves over the next quarter. All eyes will be focused on company earnings when the next round of earnings reports begins.” ⁴
Not interested in U.S. tech stocks? Check out our recent post on Chesapeake Energy Stock here.