Stocktake: Big tech keeps getting bigger

The big five technology stocks – Apple, Microsoft, Amazon, Google and Facebook – reported earnings last week, reminding sceptics that big stocks can keep getting bigger.

The big five’s combined valuation is now nearly $10 trillion, accounting for almost a quarter of the S&P 500.

The tech sector’s out-sized impact continues to generate comparisons with the 1990s dotcom bubble, but the big difference is that today’s tech leaders repeatedly justify investor expectations. On Tuesday, Apple, Microsoft and Google parent Alphabet announced combined quarterly profits of $57 billion.

Google’s revenues were up 62 per cent, Apple’s by 36 per cent, Microsoft’s by 21 per cent. All five companies easily surpassed earnings expectations, although Amazon shares fell after missing revenue estimates.

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For decades, financial researchers cautioned that size inhibits growth, that even the fastest growers eventually slow down. However, the old rules don’t appear to apply any more – not in an increasingly winner-takes-all economy where tech profit margins keep expanding.