Big tech profits soar showing there is no bubble here

Big techs have been releasing their latest results, and they're impressive. Profits at Apple and Amazon have dazzled, but Facebook, Alphabet and Microsoft results have all impressed. Those looking for a tech bubble, need to look elsewhere.

Article updated: 4 August 2020 1:00pm Author: Michael Baxter

When Google was first listed on the stock market, back in 2004, it was valued at $23 billion, and everywhere I turned people were screaming bubble. “$23 billion for a company that was loss-making, it’s crazy, the world is mad,” they said, no doubt uttering what they considered cold logic.

Last year Alphabet’s annual income was $34 billion.

It is now enjoying higher annual net income then it’s market cap 16 years ago. Some bubble!

The latest results

In its latest quarter, Apple’s revenue increased 11%, and diluted quarterly earnings were up 18%.

At Amazon, quarterly pre-tax profits doubled, rising to $5.2 billion. You might think that those profits are still quite low relative to a market cap of $1.6 trillion. But bear in mind, that it was only quite recently that the company was still loss-making. Yes, its PE ratio is 122, but look at the growth trajectory.

Microsoft saw revenue jump 13%. At Facebook sales increased 11%. Although Alphabet did reveal its first-ever year on year fall in sales, results were better than expected.

Apple, Microsoft Amazon, Alphabet, and Facebook have a combined market cap of $6.6 Trillion.

Recently, Alphabet joined the trillion-dollar club, Amazon overtook Microsoft to become the second more valuable tech, and Apple’s market cap reached $1.84 trillion. It is now neck and neck with Aramco for the title world’s most valuable company.

The markets now value Facebook at over $700 billion.

I don’t want to say ‘told you so,’ but I did. I have been arguing in this column for the best part of a decade that the giant techs are not overvalued, there is no bubble and that their valuation will keep going up.

I wonder how long it will be before one of the techs passes $2 trillion.

Next rung

If you like your techs a tad smaller, there is always the next rung down. Netflix is now valued at $215 billion. But Netflix shares are not currently at their all-time high. To find the date they peaked you will have to rewind the clock for three weeks! Shares have fallen since then, but remain 50% up on the start of year price.

I rather like Nvidia. It provides technology to support neural networks, technology at the cutting edge of artificial intelligence. Revenue at the company was up 39% in its latest quarter.


If anything, Covid has had a positive effect on the techs. And there is a good reason for this. Covid has accelerated the move towards digital — whether that is online shopping, TV on demand, remote working, hardware or technology for supporting research into Covid itself employing AI.

What’s next?

I am sure there will be dips, but tech is going to become ever more important over this decade and next.

Watch health-tech as a possible sector to start grabbing headlines.


I have not mentioned Tesla so far. I confess I find the quarter of a trillion market cap high. I would not be at all surprised to see the share price tumble. But, think forward five years and then ten. Electric cars are happening, and Tesla technology is years’ ahead of rivals. As we move towards autonomous cars and then the sharing economy, as demand for energy storage rises with ever greater use of renewable, Tesla may well enjoy meteoric growth. Yes, the share price looks high. Yes, it may well fall. But will it ever rise from the current level? It would not surprise me if it did.

New technologies

AI, the Internet of Things, genome sequencing, DNA editing technology such as CRISPR/ca9, augmented and virtual reality, 3D printing and advances in computer power will create a period of extraordinary change.

The giant techs sit pretty.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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