The combined profits from America’s top tech firms exceeded the sum earnings of companies listed in almost every other G20 country last year, new research shows.
Analysis by Deutsche Bank found that the profits of Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla largely dwarfed the wealth accrued by foreign businesses in the group, which itself accounts for 75 per cent of global trade.
Only China and Japan had greater returns than the ‘Magnificent Seven’ when all their profits are combined. Still, Deutsche showed Mag 7’s market cap would make it the second-largest country stock exchange in the world – with Japan in fourth.
The ‘Magnificent Seven’ saw returns averaging 107 per cent in 2023, according to wealth manager Evelyn Partners, quickly outgrowing the MSCI USA index of other large and mid cap segments of the market – which returned just 27 per cent last year.
It comes as welcome relief for big tech, which struggled through the pandemic as customers turned away from advertising, before inflationary pressures saw record job cuts sweep through the industry.
The top seven companies saw astonishing returns last year, dwarfing much of G20
The market capitalization of Microsoft and Apple alone are individually similar to the combined caps of all companies listed in France, Saudi Arabia and the UK, analysis shows.
Microsoft has been in the top five since 1997, excluding a four-month interregnum, and Apple since 2009, CNBC reported.
But the group also includes newcomers like Nvidia, which soared to the top in the first half of last year.
Now a world leader in artificial intelligence computing, Nvidia’s rise reflects the advances in AI technology and demand for innovative new tools across modern business.
Since the turn of the year, the company’s stock has grown an astonishing 47 per cent.
Elsewhere, OpenAI – behind ChatGPT – reached an $80bn valuation following a Thrive Capital deal backed by Microsoft.
And the US backed semiconducter manufactuer GlobalFoundries with a $1.5bn grant to produce the tech domestically.
Part of the meteoric rise of these firms is attributed to interest rate cuts after months of policy aimed at stemming inflation through 2022.
Still, analysts warn of risks to the American success story. Jim Reid, head of global economics and thematic research at Deutsche Bank, said the U.S. stock market is ‘rivalling 2000 and 1929 in terms of being the most concentrated in history’.
Travis Oglesby, senior wealth advisor at Avidian Wealth Solutions, wrote on LinkedIn: ‘On one hand, we should be proud of American innovation. On the other hand, it is a bit frightening to me how powerful and large these few companies have become.’
While some have achieved startling success, it is notable Elon Musk’s Tesla fell from one of the top five most valuable companies in 2021/22 to 10th in the space of a little over a year.
Forbes reported at the start of 2024 that Tesla had seen profits sink 23 per cent after ‘a series of price cuts on its cars’.
The company’s gross margin in Q4 of last year slumped 17.6 per cent to its lowest since 2019.
‘At the edges the Mag 7 have some volatility around the position of its members, and you can question their overall valuations, but the core of the group have been the largest and most successful companies in the US and with it the world for many years now,’ Reid added.
Shifts in the market have seen the dominance of ‘FAANG’ – Facebook (parent group Meta), Apple, Amazon, Netflix and Google (parent group Alphabet) – supplanted by the Magnificent Seven, switching out Netflix for Nvidia.
“MnM? Microsoft, Nvidia & *now* Meta Leading in AI Era,” Raymond James analyst Josh Beck said in a note to clients earlier this year.
Earlier this month it was reported Microsoft had overtaken Apple as the world’s biggest company, rising to a stock value of $405.
Nvidia had risen 44 percent to $693, and Meta, formerly Facebook, was up 33 percent to $459.
Bret Kenwell from eToro said: ‘It’s been a fantastic stretch for the so-called “MnM” trio — Microsoft, Nvidia and Meta.
‘Meta and Nvidia are up about 30 percent and 40 percent year to date and about 145 percent and 220 percent over the past year, respectively.
‘Microsoft hasn’t been a slouch either, up almost 60 percent over the past 12 months.’
Tesla has navigated some challenges in recent years – but remains a top 10 US tech company
Only China and Japan from G20 offered returns greater than those of the top American tech firms.
The group also includes Argentina, Australia, Brazil, Canada, France, Germany, India, Indonesia, Italy, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the U.K.
Deutsche also recently noted that India became the world’s fastest-growing major economy while holding the G20 presidency through 2023.
In August, the country became the fourth to make a moon landing with its Chandrayaan-3 spacecraft.
About 60 per cent of India’s 1.3bn population live on less than $3.10 a day, the World Bank’s median poverty line.
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