Back in 1999, high-tech companies such as Cisco, Oracle, Microsoft, Intel, Nokia, and Lucent were investor darlings. But then came the tech bust. Now, the NASDAQ has recovered and tech stocks are in demand again. Now, however the BIG 5 are Facebook, Amazon, Apple, Microsoft (still), and Alphabet (a holding company for Google).
The specific businesses these companies are in are quite different, though. For example, Amazon is a champion on online marketing with a stock price around $1,000 and a market capitalization approaching half a trillion dollars. Facebook, a company that didn’t even exist back in 1999, is a social media giant with a market value only a bit lower than that of Amazon. And here comes omnipresent and omniscient Google, a company with with a market value of $650 billion.
Lately, the stock prices of these companies plunged after Goldman Sachs questioned their valuations, CNN reports. According to Robert Boroujerdi, Goldman Sachs analyst, the tech giants are cheaper than their counterparts from 1999. But he is concerned that these companies aren’t as profitable.
“The recent run in large-cap tech stocks has evoked memories for some investors of the last euphoric NASDAQ run,” he claimed.
After this announcement, shares of Amazon fell 4 percent, while other major tech giants including Amazon, Facebook, and Alphabet went down 2-3 percent. These shares are still up quite a lot since the beginning of this year. One reason is the post-election rally, the other is strong earnings growth. The question is whether this growth can be sustained. This, indeed, may be difficult to do for companies with already large presence in the market and huge valuations.