Tech Megacaps Reach $21 Trillion as Market Caps Surge

From courtroom dramas to boardroom maneuvers, the past week has been a pivotal one for tech investors, witnessing significant market cap shifts across the industry’s giants.

The resolution of Google’s antitrust case sparked rallies for Alphabet and Apple. Broadcom shareholders celebrated a major new $10 billion customer, fueling the stock’s ascent. Meanwhile, Tesla’s stock received a jolt from a newly proposed compensation package for CEO Elon Musk.

In total, the collective market capitalization of the U.S. tech industry’s eight trillion-dollar companies swelled by an impressive $420 billion this week, reaching a staggering total value of $21 trillion. This surge occurred despite a downturn in Nvidia shares, highlighting the strength and resilience of the sector as a whole. This collective valuation represents roughly 36% of the entire S&P 500, an unprecedented concentration of market power.

The week’s gains present a certain irony. Alphabet’s nearly 10% surge earlier in the week stemmed directly from the outcome of the U.S. government’s antitrust efforts, intended to curb the search giant’s dominance. Since 2020, Google, Apple, Amazon, and Meta have all faced antitrust scrutiny from the Department of Justice (DOJ) or the Federal Trade Commission (FTC), reflecting a broader push to regulate Big Tech.

Google’s initial loss to the DOJ a year prior was widely considered the most significant antitrust decision impacting the tech industry since the landmark case against Microsoft over two decades ago. However, in this week’s remedies ruling, U.S. District Judge Amit Mehta refrained from mandating the sale of Google’s Chrome browser. Instead, he issued a more limited set of penalties, including a requirement for Google to share search data with its competitors.

This nuanced decision buoyed not only Alphabet but also Apple. The ruling allowed the continuation of the lucrative arrangement wherein Google pays Apple billions annually to remain the default search engine on iPhones. This outcome highlights the complex interplay between regulatory oversight and established business models in the tech landscape, even with an ever changing legal landscape that Big Tech seem to be always involved with.

Following the decision, Wedbush Securities analysts noted that the ruling “removed a huge overhang” on Google’s stock and dispelled a “black cloud worry” hanging over Apple. Furthermore, they posited that it paves the way for the companies to pursue deeper collaborations in artificial intelligence (AI), particularly involving Gemini, Google’s advanced AI models. The analysts suggest that Apple and Google may deepen partnership in the realm of AI as well.

Judge Mehta cited the emergence of generative AI in his decision. The development of generative AI has introduced greater competition and fundamentally reshaped market dynamics. This perspective underscores the importance of considering emerging technologies when evaluating and addressing antitrust concerns.

The surge of competition by OpenAI, Anthropic, and Perplexity has diminished Google’s dominance. Judge Mehta acknowledged as generative AI undergoes development might prove to be “game changers.”

Despite a separate antitrust matter emerging from Europe, Alphabet investors remained unfazed earlier in the week. The company was penalized by European Union regulators with a substantial fine of 2.95 billion euros ($3.45 billion) for alleged anti-competitive practices within its advertising technology business.

While OpenAI indirectly impacted Google and Apple this week, it had a more direct influence on Broadcom’s stock surge pushing them faster into the trillion-dollar club.

Broadcom’s CEO, Hock Tan, revealed that his chipmaker had secured a $10 billion contract with a new client, bringing Broadcom’s total amount of AI clients to four.

Analysts have identified OpenAI as the new client, with reports indicating a partnership between the two firms. As well, Broadcom is the newest entrant into the trillion-dollar club, thanks to the company’s custom chips for AI, already used by Google, Meta and TikTok parent ByteDance. With Its 13% jump this week, the stock is now up 120% in the past year, lifting Broadcom’s market cap to around $1.6 trillion.

Barclays analysts wrote in a note, maintaining their buy recommendation and upping their price target on the stock. As suggested by Barclays analysts that the company is firing on all cylinders with clear line of sight, this shows the rapid innovation which Broadcom hopes to capture in the future.

For Nvidia, it was not something to celebrate. This past week Nvidia shares fell, the worst performance among the megacaps. The stock has now dropped for four consecutive weeks.

Nvidia remains the largest company by market cap, valued at over $4 trillion, with its stock up.

Microsoft also fell this week. Shares are still up over the last 12 months.

On the flipside, Tesla has been the laggard in the group. Shares of the electric vehicle maker are down this year due to a multi-quarter sales slump. However, Tesla shares climbed, sparked mostly by gains on Friday after the company said it wants investors to approve a pay plan for Musk that could be worth up to almost $1 trillion.

Tesla Chairwoman Robyn Denholm told CNBC’s Andrew Ross Sorkin the plan was designed to keep Musk “motivated and focused on delivering for the company.”