Big Tech, Big Risk? money M ost people love tech, even if they don’t fully understand it. It consists of cutting-edge stuff and represents our hopes for the future. We’re talking about compa-nies that participate in social media, software, semiconductors, computer and communications equipment, internet services, and the like. In general, tech stocks have performed spectacularly well over the last few years, with their performance dominating stock returns. While these companies have a significant impact on the economy, their repre-sentation in the stock market has become somewhat outsized. Using a broad definition of “technology,” 26 • AMAC Magazine that sector accounts for just under 40 percent of the Standard & Poor’s 500 (“S&P” or “index”). The six largest S&P companies are all tech compa-nies: Apple, Microsoft, Amazon, Tesla, Alphabet (Google’s stock consisting of two classes), and Facebook. These account for about 24 percent of the index. The weighted average return of these stocks as of mid-February 2021 was 78 percent over the past 12 months. tive outlook regarding the future. We must ask, how much of that future is already reflected in the price of a stock? To a large extent, tech companies have excelled in the COVID econ-omy. Online ordering and remote meetings would be impossible with-out tech. With money in consumers’ pockets and no place to go, tech gadgets like iPhones and hi-def TVs have become exceedingly popular. These trends are likely to continue even as COVID’s impact on our daily lives begins to recede. The use of the cloud to store and process informa-tion will only increase. 5G standards for communications as well as elec-So it might appear easy. Big tech is well established, seeming to gener-ate great returns. But returns are not automatic, and investing involves risk. Importantly, the current value of any investment reflects a collec-
AMAC Magazine April 2021: Page 26
