Forget the Magnificent Seven. Let’s talk about the Big Three.
In reading this nice piece my Sherwood colleagues did spotlighting the lopsided contributions of mega-tech companies to this year’s market rally, it struck me that we’ve never had three, separate three-trillion-dollar companies before.
In fact, until 2018, there were precisely zero companies with valuations that large.
It’s hard to get one’s mind around the what it even means to have a trillion-dollar capitalization, much less a three-trillion dollar market price tag. At some point the numbers become a kind of abstraction.
But perhaps the most remarkable thing, or one of the most remarkable things about Apple, Microsoft and Nvidia, is that there’s very little indication they’re egregiously overvalued.
Forward price-to-earnings multiples of 30 (Apple), 33 (Microsoft) and 43 (Nvidia) don’t seem particularly unreasonable in light of the apparently impregnable (and in some cases quasi monopolistic) positions they occupy in the American economy and the insane profits these companies produce. Apple and Microsoft both made more than $20 billion in Q1 alone. Nvidia made $13 billion. Sheesh.
