Big Tech

What’s going on?

Microsoft and Alphabet announced stronger-than-expected quarterly results late on Tuesday, as they sold investors on the benefits of working from home all over again.

What does this mean?

Microsoft grew revenue from its computing and gaming segment by a better-than-expected 9%, its cloud computing business by 30% (even if that particular area was still smarting from the loss of a $10 billion US government contract), and its productivity business – services like Office 365 that continued to benefit from remote working – by 25%.

Alphabet’s ad business across Google and YouTube likewise came good, shooting way beyond investors’ expectations – as did its similarly WFH-boosted cloud computing business. And since Alphabet and Microsoft both managed to keep their costs in check, they turned in higher profits than expected too.

Why should I care?

For you personally: Cut Big Tech down to size.

Big Tech stocks – these two, plus Amazon, Facebook, and Apple – collectively make up over 20% of the S&P 500, the key US stock market index. And since it’s weighted by market capitalization, their influence is only going to keep growing as these giants do. But there is an equal-weighted S&P 500 index you can invest in where every company – no matter its size – represents 0.2% of the index. And over the last 20 years, it’s actually outperformed its much higher-profile sibling by almost 90%.

The bigger picture: Buy into the megatrends.

There are a number of “megatrends” expected to define the next couple of decades, and a couple of them are playing right into Big Tech’s hands. Ecommerce, for one: shoppers searching for products is Google’s bread and butter, as are the paid ads that appear at the top of the results. And for another, the cloud-driven digital transformation market will be worth an estimated $3.6 trillion by 2026 – rewards it’s hard to see reaped by anyone other than the likes of Microsoft.

For information purposes only, not intended to constitute financial advice from us. The customer should assess the risk of  potential loss carefully and individually before investing in any financial products. Dabbl Group Limited is authorised by the FCA under the reference numbers 767263 as an appointed representative of its Principal firm VIBHS Financial Ltd, which is authorised and regulated by the Financial Conduct Authority under the reference number 613381.

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