The COVID-19 pandemic’s impact on the US economy has been devastating. With people spending less money shopping, eating out, and traveling, businesses across the country have been forced to cut jobs, pushing the unemployment rate to an alarming 14.7 percent in April of 2020.
Despite the economic turmoil caused by the pandemic, the stock market has shown plenty of promise, largely thanks to the surging shares of big tech companies like Facebook, Amazon, Apple, Netflix, and Google.
These five companies, collectively known as FAANG, have seen the demand for their products and services surge amid the pandemic, resulting in relatively higher earnings than most other industries.
Not to be outdone, Tesla has also been delivering a remarkable performance during the pandemic. The company saw its stock price rise by more than 250 percent to a whopping $1,500 per share in July of 2020.
Adam Crisafulli, founder of Vital Knowledge, called the infatuation with super-cap tech a “huge source of support” for the market, with these “index-dominating” stocks going “parabolic” as investors continue to inject capital into them. He also mentioned that these super-cap tech companies have been able to adjust well to the pandemic by initiating “virtual” models and having their employees work remotely.
New York-based wealth management and research firm Bespoke Investment Group believes that the current surge in tech stocks is the third act of the current bull market, which started when the market rebounded following the stock market crash in early 2020.
According to the firm, investors first bought “stay at home” stocks in the tech and energy sectors, which they then followed up with “reopen” stocks in the travel and retail industries. By early June, the “reopen” stocks had either paused or pulled back, with only the FAANG or tech stocks remaining popular.
FOX Business’ Stuart Varney argued in a July episode of My Take that big tech has “enriched” the US and that the industry will continue to “dominate” the economy even after the pandemic.
Varney singled out companies like Amazon, Apple, Facebook, Google, Microsoft, Netflix, and Tesla as the “backbone of the emerging high-tech economy.” He pointed out that no group of stocks has been as dominant as these companies in 50 years.
Other experts, however, warn that Wall Street’s reliance on big tech companies to carry the rest of the market on its shoulders could eventually backfire if the industry suddenly falls out of favor with investors for whatever reason. A large gap between the “winners” and the “losers” would result in a very imbalanced market, which could be devastating in the long run. It is therefore in everyone’s best interest for these tech companies to continue doing well and to stay relevant for as long as possible.