Market Overview

U.S. big tech dominates stock market after monster rally, leaving investors on edge

U.S. technology giants are increasingly dominating the stock market in the midst of the coronavirus pandemic, even as they draw accusations of unfair business practices, and some investors fear the pump is primed for a tech-fueled sell-off.

The combined value of the S&P 500’s five biggest companies – Apple Inc (AAPL.O), Inc (AMZN.O), Microsoft Corp (MSFT.O), Facebook Inc (FB.O) and Google parent Alphabet Inc (GOOGL.O) – now stands at more than $7 trillion, accounting for almost 25% of the index’s market capitalization. That compares with less than 20% pre-pandemic.

Yet the companies are drawing opposition. U.S. lawmakers are accusing them of stifling competition, a charge also leveled in recent days against Apple by Epic Games, creator of the popular game Fortnite. Some investors worry the companies powering this year’s equity rally could become the market’s Achilles’ heel if a legal assault, a shift to undervalued names or a move higher in bond yields dries up appetite for technology stocks.

One potential threat comes from an array of investigations and legal actions. Alphabet, Facebook, Amazon and Apple face a series of federal government probes into allegations that they unfairly defend their market share, with litigation against Alphabet possible later this year.

The opposition is a worry for investors hoping the companies will continue delivering robust growth that justifies their valuations.

Amazon said it operates in a “fiercely competitive” market, citing U.S. Census Bureau data that only about 10% of U.S. retail sales occur online.

Apple declined comment. The company previously said it competes vigorously against Samsung Electronics Co Ltd (005930.KS) and other Android device makers in the smart phone markets.

Alphabet declined comment. It previously said it competes with Amazon, Microsoft, Comcast Corp (CMCSA.O), AT&T Inc (T.N) and many others.

U.S. big tech dominates stock market after monster rally, leaving investors on edge, Reuters, Aug 28

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