Big Tech’s Missing Growth Story
Wall Street loves a good story, and there appears to be an absence of catalysts capable of supplementing AI mania as Big Tech’s growth story.
Earlier this month, we talked about DeepSeek breaking AI mania fever on Wall Street. In thinking through that essay further, it’s possible that we underestimated one key question found with AI mania fever breaking: What comes next? Wall Street loves a good story, and there appears to be an absence of catalysts capable of supplementing AI mania as Big Tech’s growth story. This may already be impacting Big Tech stock price valuations, which tariff news would be masking. Management teams and boards will likely have no choice but to respond.
Heading into this week, we witnessed one of the most sudden and severe contractions in Big Tech valuations in years. While the drawdowns may not pack the same kind of punch given the volatile news cycle found with tariffs, other sectors saw more in the way of valuation floors being established. For U.S. homebuilders and energy companies to outperform Big Tech companies that have finite exposure to tariffs raises an eyebrow.
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Big Tech Is Winning Over Wall Street
While Wall Street remains fully engrossed by NVIDIA, there is a story to be told that is flying under the radar.
While Wall Street remains fully engrossed by NVIDIA, there is a story to be told that is flying under the radar. With several key macro headwinds now in the rearview mirror, Wall Street has turned decidedly more optimistic on Big Tech (a bucket that I have long defined as including Apple, Alphabet, Meta, Amazon, Microsoft). Big Tech as a group is up 28% in 2024 while the S&P 500 is up 15%.
Here are Big Tech market caps, with NVIDIA added in for good measure:
Microsoft: $3.3T
Apple: $3.2T
NVIDIA: $3.0T
Alphabet: $2.3T
Amazon: $2.0T
Meta: $1.3T
A couple things jump out at me about those totals.
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Big Tech’s Hardware Paralysis
It’s been a very busy two months for consumer gadget enthusiasts. With Samsung kicking off the fall product cycle earlier than usual in July to Google’s product event in NYC last week, we now have a good view of how tech companies are positioned heading into the holiday season. As the gadget recession rages on while AI mania remains palpable, the way companies are thinking about hardware is splintering, leading to more questions and unknown.
In terms of the underlying themes found with product events (six to be exact – Amazon, Microsoft, Google, Samsung, Apple, and Meta), there is a growing recognition / acceptance that ecosystems will dictate long-term success. Wearables are finally getting the attention they deserve. At the same time, years of Apple ecosystem momentum is front-and-center with most companies. There is no more denying that Apple’s billion-user installed base is a force to be reckoned with. Thoughts of competing with Apple on price are firmly in the rear-view mirror.
Here were more granular takeaways from this year’s fall product event cycle:
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Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special bundle pricing is available for Above Avalon members.
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Receive Exclusive Essays. The cornerstone of an Inside Orchard subscription is access to Neil’s weekly essays on the latest developments in the technology industry. Weekly essays are 1,000 words and sent via email on Thursdays. Essays revolve around the following topics: technology industry analysis, business model analysis, technology’s impact on societal and consumer trends. A sample essay can be viewed here.
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