FAANG Losing Its Bite?
Remember when it seemed the FAANG trade couldn’t lose? Well, fortunes are reversing. Let’s look at Big Tech’s rise over the past 20 years.
Flash back to October 2002: Apple’s iPod is a year old, the dot-com bubble is bottoming out, and Microsoft and IBM are the only tech companies in the world’s largest 10. In fact, Big Tech (encompassing the information technology and communications services sectors) makes up only 17% of the S&P 500.
Since then, Mark Zuckerberg launched Facebook from his dorm in 2003, Netflix began streaming in 2007, and Apple became the first $1 trillion company in 2018, then the first $2 trillion company in 2020. Now, Big Tech makes up 32% of the S&P 500 and has become a main driver of overall market performance.
This year’s rising rates and falling demand have investors reconsidering fundamentals and pushing valuations lower. Through the end of October, the information technology and communications services are down 27% and 39% for 2022, respectively.
While the party may be over, for now, Big Tech isn’t going anywhere. Longer term there are several tailwinds that should be supportive, and we’re excited to see where innovation takes us in the next 20 years.