Google’s parent company Alphabet passed the $1,000 mark for the first time – just days after Amazon shares reached the same milestone.
The share price of Alphabet/Google has now seen a 20-fold increase since Google launched its initial public offering (IPO) in 2004.
The $1,000-barrier breakthrough comes just a month after Alphabet posted first-quarter results showing Google advertising revenues up by nearly 19% to $21.4bn.
The world’s five most valuable companies by capitalisation are now all tech stocks, with Apple leading the way at $800bn, followed by Alphabet ($680bn), Microsoft ($540bn), Amazon ($476bn) and Facebook ($440bn), according to figures from Reuters on May 30.
Alphabet CEO Larry page is now worth $49.5bn, putting him ninth in the list of the world’s richest men, according to Bloomberg, with Amazon’s surge taking founder Jeff Bezos to second place at $82.9bn, now only marginally behind long-time number one Bill Gates on $89.2bn (Forbes).
Strong competitive position
“These are companies that are pretty much plugged into our day-to-day life nowadays and yes, they are tech companies – but they are a little bit like utilities as well,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.
“If you look at the companies themselves, the likes of Alphabet, Facebook and Amazon are leaders in their field. They are obviously very big companies with relatively healthy balance sheets which also lets them deal with opposition by buying it up, so they are in a very strong competitive position.
“It’s interesting to look back at the tech boom in the late 1990s, and I think these are very different companies to the companies we saw then. There was a lot of ‘blue sky thinking’ in valuations that were pegged to companies that perhaps never made a profit, whereas these are companies that do have a high level of profits.”
He said the tech giants were facing some challenges on the political front, both in terms of content control and a backlash over the amount of tax they pay.
But he added: “They are large companies, they are well resourced and they are still driving forward with innovation.”
‘Next wave’ of technology
Meanwhile RBC Capital Markets’ internet analyst Mark Mahaney said in a CNBC interview that in 20 years of covering internet stocks he had never seen valuations that were less controversial.
“We’ve gone 16 quarters at 50% year over year growth for Facebook, 29 quarters of year over year retail growth for Amazon. The sentiment has settled in, the valuations are reasonable,” he said, though he added he didn’t think there were any “glaring back-of-the-truck” buying opportunities among the internet giants.
He said the next wave of technology – artificial intelligence (AI), machine learning, voice activated internet (VAI) – meant the big names were ideally placed to build revenues still further.
“I don’t know how you would not have Amazon, Facebook Google, on that list – those three names are really well positioned for AI opportunities,” he said. “It brings down costs, it creates efficiencies in business processes and it’s going to create more revenue opportunities for the next three to five years.”