Published on September 30th, 2020 | by Bibhuranjan0
Big 6 Account for Half the Value of the Nasdaq 100 and Share Values Still Increasing
It has long been known that tech companies lead the way on the Nasdaq 100 but a quick look now, will show you just how dominant they are. Among the 100 companies listed, the big 6 actually account for half the value of the entire index.
You know them, Apple, Microsoft, Amazon, AlphaBet, Facebook, and Tesla. Even more ominous is the fact that despite the global pandemic, their stocks have all gained in value throughout 2020. Alphabet props up the rest with gains of 16% while Tesla sits at the top with 279%. Other companies performing strongly on the Nasdaq 100 despite the COVID outbreak include Netflix, Paypal, and Zoom.
It is not just on the Nasdaq 100 either. Sure, this has been the strongest performing index for a good number of years but tech companies also dominate other indexes including the S&P 500 (22% of index value) and the Nasdaq Composite (41% of index value).
Interestingly, one of the few non-tech companies performing strongly is Moderna. Easy to see why when many people believe they will be able to develop a COVID-19 vaccination. Their stock has risen an impressive 320% since the start of the year.
Why tech companies are showing such big share price increases
When you think about it logically, it is easy to understand why the companies listed above can still increase their share values.
What is there to do during lockdown? Watch Netflix or jump on Facebook perhaps? Maybe you can’t get out to buy something (Amazon). You also need a device (Apple or Microsoft) to do so. You might need to send money to loved ones that cannot work (PayPal). In the current climate, we need technology more than ever, so it is easy to understand why their share values have increased so much.
Zoom has been one of the biggest benefactors because of the increase of working from home and people not being able to see their friends and families. Their video conferencing software is now being adopted by so many more businesses and individuals. Companies such as https://internetetsecurite.ch saw their internet visits increase 50% as did their profits.
Internet adoption increasing too
Technology has always performed strongly on the indexes even before this pandemic, but it has grown more in value because of it too. We live in the world of the information superhighway and we have never used it as much. In the Western world, do we know anybody that does not have a mobile device?
Pre-COVID, adoption was already on the increase with it reported that 60% of the world’s population were active internet users. That is around 4.6 billion people. As technology has evolved, lower-end cellphones are now more affordable for people in poorer countries. Combine that with the cost and speed of the internet in those countries also dropping, and you have a climate where more people can gain access. A good example of this is countries in SouthEast Asia where internet adoption has been at record figures in recent years.
Could the pandemic eventually hurt tech companies?
Absolutely, economies around the world have been hit hard and will continue to be hit hard. Many people are out of work or on furlough schemes, so are bringing home less money. Sure, there would have been a surge in sales of mobile and gaming devices, an increase in those watching movie streams, and those sending money. Once savings have been depleted and people need to tighten their belts, however, this will slow down.
There has been talk of a global recession, so in the long term, it stands within reason that the share values of these companies will be hit. Probably not as bad as in other industries, but they will not walk away unharmed.
Tech firms have long dominated the markets and are likely to continue to do so. Whether they dominate quite as much as they do right now, though, remains to be seen. Although they account for half of the value of the Nasdaq and have been making the sales of other companies can only dream of like the rest of us, they would rather this pandemic would come to an end. Let’s hope that this happens as soon as possible.
Image by Lorenzo Cafaro from Pixabay