For years, the influence of tech giants on the U.S. stock market climbed as their share prices soared to record highs. But now, that influence has been greatly diminished by the stock market crash of 2022.
U.S. Technology Five Market Cap Shrinks by $21 Trillion
Even after last week’s surge, Apple, Microsoft, Amazon, Google parent Alphabet and Facebook parent Meta have lost more than $3 trillion ($21 trillion) in market value this year, as slowing revenue growth and rising interest rates hit their shares. That has reduced their weighting in the S&P 500 to about 19 percent, down from a record 24 percent in September 2020.
Apple, Microsoft, Alphabet, Amazon and Meta are responsible for about half of the S&P 500’s decline this year, the data show. If all components of the index were equally weighted, rather than by actual market capitalization, the index would have fallen by 6 percentage points this year.
Technology five weighting from 24% to 19%
This shift shows how much the stock market landscape has changed since the Federal Reserve’s emergency easing of monetary policy that triggered a speculative frenzy. As the technology sector’s influence wanes, more traditional sectors such as energy and banks are gaining weight in the S&P 500, with companies such as ExxonMobil and Wells Fargo benefiting from high oil prices or rising interest rates.
“Large technology stocks, in particular, are benefiting from the almost endless liquidity and cheap money that comes with high growth,” said Dirk Friczewsky, market analyst at independent brokerage ActivTrades, “and now the financial markets are blowing A different wind is blowing, and investors don’t want to get knocked out of the game.”
U.S. data released last Thursday showed that inflation slowed more than expected in October, easing pressure on technology stocks and fueling optimism that the Federal Reserve may soon halt its most aggressive rate hike cycle in decades, pushing the Nasdaq 100 up 9.4 percent on Thursday and Friday, its best two-day performance since 2008. Even so, the Nasdaq is still down 28% this year, and the S&P 500 is down 16%. And not everyone is convinced that last week’s rally in technology stocks will continue.
