This has been a big week for big tech companies, with five of the Magnificent Seven reporting earnings amid growing talk of valuation bubbling. The S&P 500’s trillion-dollar club now has six members, and Facebook’s parent company Meta last week returned to a $1 trillion market cap for the first time since 2021.
Last week was also a good day for Microsoft, which became the first stock after Apple to become a $3 trillion stock.
Excluding Tesla, the company lost more than a quarter of its value in January and fell again last week after lower-than-expected earnings, but momentum is at an impressive 7. Nvidia rose his 27% in January and continues to make impressive gains. Meta (up 13%), Google’s parent company Alphabet (10%), Microsoft (9%), Amazon (5%) and Apple (5%) all grew steadily in 2024.
Vincent Mortier of Amundi, Europe’s largest asset manager, says that’s too much and that big tech stocks are “approaching a bubble.” Dan Suzuki of Richard Bernstein Advisors agrees, saying he believes we are in tech bubble territory and that “eventually” there will be a “liquidation.” Market bull Ed Yardeni is also concerned. He said the S&P 500 “could be in the midst of a tech-driven crash” and that “irrational exuberance” could inflate “speculative bubbles” like dot-com.
Bubble talk is probably premature. Still, there are problems. Suzuki points out that the top 10 stocks in the S&P 500 account for more than 30% of the index, the largest share in more than 40 years. Mortier cautioned that the market had not factored in new competition or the possibility of antitrust violations, saying that “oligopoly or monopoly situations will not last forever.”
Microsoft and Alphabet will report their results after the close of trading on Tuesday. Apple, Amazon and Meta also released reports this week, with investors hoping strong results will justify rising valuations in tech companies.