In the great recession more than a decade ago, big tech companies like everyone else have reached a difficult point. Now they have become the undisputed winners of the pandemic economy.
The combined annual sales of Amazon, Apple, Alphabet, Microsoft and Facebook are around $ 1.2 trillion, more than 25 percent higher than what they saw at the start of the pandemic in 2020, according to earnings reported this week was recorded. In Less Than A Week These five giants make more sales than McDonald’s in a year.
The U.S. economy is returning from 2020 when it contracted for the first time since the financial crisis. But for the tech giants, the pandemic hit was hardly a slip-up. It’s a fantastic time to be a tech titan – as long as you watch the screaming politicians, the daily headlines about killing free speech or tax evasion, the problems faced by competitors and workers, and too many to count , ignoring legal investigations and lawsuits.
America’s tech superpowers don’t deserve bonkers despite the deadly coronavirus and its impact on the global economy. They have gotten even stronger because of the pandemic. It’s both logical and slightly insane.
The hugely successful last year also raises awkward questions for tech company bosses, the public, and elected officials who are already angry with the industry: Is what’s good for big tech good for America? Or do the tech superstars win while the rest of us lose?
Americans have more cash in their pockets thanks to government stimulus measures and pandemic savings, and tech giants are getting a significant stake. Their combined sales are approximately 5 percent of the United States’ gross domestic product.
Big Tech’s big money in the pandemic has an understandable root cause: we needed his services.
People loved Facebook’s apps for keeping in touch and talking, and companies wanted to pay Facebook and Google, which owns Alphabet, to find customers stuck at home. People preferred to buy diapers and lounge chairs on Amazon rather than risking their health in stores. Companies loaded software from Microsoft when their companies and employees went virtual. Apple’s laptops and iPads are becoming lifelines for office workers and school children.
Before the pandemic, America’s tech superpowers had an impact on how we communicated, worked, entertained, and shopped. Now they are practically inevitable. Investors bought big tech stocks to bet that these companies would be nearly invincible.
“They’ve been on their way up and for nearly a decade and the pandemic has been one of a kind,” said Thomas Philippon, professor of finance at New York University. “It was a perfect positive storm for them.”
Times were not so good for these companies in the final economic phase. During the 2007-2009 downturn, Microsoft sales declined slightly, and its share price fell 60 percent from Fall 2008 to March 2009, a low point for US stocks. Google and Amazon have each lost up to two-thirds of their market value.
May 2, 2021, 4:03 p.m. ET
A sign of how different this time around: Amazon’s sales are growing much faster in 2021 than in 2009, when the company was a fifteenth of its current size. Revenue in the first quarter rose 44 percent year over year, and Amazon’s pre-tax profit – which has never been more robust – more than doubled to $ 8.9 billion. Businesses are addicted to Amazon’s cloud computing services, which have seen sales grow 32 percent and customers can’t live without Amazon’s delivery. Investors love Amazon too. The company’s market value has nearly doubled to $ 1.8 trillion since early 2020.
For the other tech giants, it’s like their brief dive from a pandemic never happened. Advertising sales usually rise and fall with the economy. However, as other types of ad spend shrank as the U.S. economy contracted last year, ad sales for Google and Facebook rose. The growth was even better for them in the first three months of this year.
A year ago, analysts feared Apple could be crippled by the pandemic in China, which is the center of the company’s manufacturing activities and major consumer market. The fears did not last long. In the first three months of 2021, Apple’s iPhone sales grew the fastest since 2012. Sales in mainland China, Taiwan, and Hong Kong nearly doubled year over year.
The tech giants aren’t the only companies gathering in dark times. America’s big banks were in tears too. So do some of the younger tech companies like Snap and Zoom, makers of the video conferencing app preferred by the pandemic. The crisis forced all types of businesses to go digital quickly in order to be successful. Restaurants invested in online sales and delivery, and doctors were deeply involved in telemedicine.
However, the dictionary doesn’t have enough superlatives to describe what’s happening to the top five technology companies. It’s all a bit awkward, really. It’s rocket fuel for critics, including some regulators and lawmakers in Europe and the United States, who say the tech giants are crowding out newcomers and leaving everyone worse off.
Big tech companies face fierce competition that leads to better products and lower prices, but their bank statements might suggest otherwise. Facebook’s profit margins are now higher than they were before the pandemic.
Part of their success can be explained by the peculiarities of the pandemic economy. Some people and sectors are doing great while other families are lining up at food banks and companies like airlines begging for cash. In contrast to the stock market problems during the Great Recession, the stock indices in the USA have reached new highs.
The tech superstars also took advantage of this moment. Alphabet and Facebook have used the pandemic to limit less important areas such as advertising costs and travel and entertainment budgets. And the tech giants have generally increased spending in areas that expand their benefits.
Alphabet is now spending more on large-scale projects like building computer complexes than Exxon Mobil is spending on digging oil and gas. Amazon’s workforce has grown by more than 470,000 people since late 2019. This deepens the moat that separates the tech superstars from everyone else.
Big tech is emerging from the pandemic, lean, mean and ready for a US economy expected to come back to life in 2021. In the meantime, there are still long lines at food banks. Some American workers who lost their jobs last year may never get them back. Housing lawyers fear millions of people will be evicted from their homes. And being big tech is an invitation for everyone to hate you – but you have huge piles of money.
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