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The profits and market capitalizations of the so-called "Magnificent 7" (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla) exceed those of all listed companies in almost every G20 country, Deutsche Bank said Tuesday in a research note.

The tech companies have had some farm years. First there was the corona crisis, followed by a rush of AI stocks. 2022 in between was a difficult year though due to tightening central bank money policies. Meanwhile, companies can prepare for the first interest rate cuts.

In the news: The combined market value and profits of the seven largest tech companies beat nearly all the world's stock markets, a Deutsche Bank survey shows.

  • Deutsche Bank analysts stress that the seven largest U.S. tech companies combined would be the second-largest stock market in the world. "Microsoft and Apple each have a market capitalization comparable to that of all listed companies in France, Saudi Arabia and the United Kingdom combined," they add.

Too much concentration?

Zoom in: Some analysts worry that there is so much investment capital in tech giants.

  • Jim Reid, an economist at Deutsche Bank, warned just last week that the U.S. stock market "rivals 2000 and 1929 in terms of being the most concentrated market in history."
    • Deutsche Bank analyzed the share prices of all 36 companies that were in the top five most valuable companies in the S&P500 since the mid-1960s.
    • Reid notes that many of those companies eventually fall out of the top five as investment trends and earnings prospects change, but they typically remain among the 50 largest companies in the S&P500. That is the case for 20 of the 36 listed companies surveyed.
    • The economist shed light on the "Magnificent 7": "Microsoft has been in the top 5 since 1997, with a four-month exception. Apple since December 2009, Alphabet since August 2012 (except for two months) and Amazon since January 2017. The youngest newcomer is Nvidia. It has been in the top five since last year."
      • In fact, right now the chip giant is the third largest U.S. stock market company. Nvidia overtook Amazon and Alphabet in a matter of weeks. The chip giant's stock market value has increased 50 percent since the beginning of 2024.
      • Tesla was in the top five most valuable stock market companies in the US for thirteen months in 2021 and 2022. Now Elon Musk's company must be satisfied with tenth place. Since the beginning of this year, the car maker's share price has fallen about 20 percent.

What about the other U.S. companies?

Outlook: Daniel Casali, chief investment strategist at financial services firm Evelyn Partners, notes in an interview with U.S. news site CNBC notes that there are signs that other companies in the S&P500 will also gain ground.

  • "Despite rising interest rates, companies' sales and profits have remained resilient. This can be attributed to companies controlling their costs better and households accumulating more savings during the pandemic. In addition, the U.S. labor market is healthy with nearly three million new jobs created by 2023," Casali said.
  • Many companies have also managed to improve their margins, which Casali said indicates that companies have properly raised their prices and passed on the effects of high inflation to their customers.

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