(Bloomberg) — For years, technology behemoths such as Apple Inc. and Microsoft Corp. have dominated the list of the world’s largest companies. Now cracks are starting to appear in that leadership.
Of the 10 biggest companies by market value, eight can be categorized as tech stocks, using a generous definition that encompasses electric-vehicle maker Tesla Inc.
But Apple’s reign at the top is threatened by $100-a-barrel oil, which is buoying shares of Saudi Aramco, Tesla has dropped out of the $1 trillion club and Facebook owner Meta Platforms Inc. is in danger of falling from the top 10 entirely. The plunge in Chinese tech stocks has removed companies such as Alibaba Group Holding Ltd. from the list over the past couple of years.
The shifting fortunes reflect the simple fact that markets move in cycles. Tech and telecom companies dominated the market in the dotcom bubble of the late 1990s, while oil companies Exxon Mobil Corp. and Chevron Corp. and consumer businesses such as Walmart Inc. were the leaders a decade ago.
Now, as with the internet bubble, investors are realizing that expectations for tech companies may just have gotten too high.
“People have been mistakenly thinking that these companies will be bigger and more profitable than they are now, which is entirely possible,” said Bill Smead, chief investment officer of Smead Capital Management. “But the problem is when you get in a financial euphoria episode, they capitalize that future way too high.”
Since the start of the year, the tech stocks in the top 10 have shed a combined $2 trillion in value, with the tech-heavy Nasdaq 100 Index down 18%.
With investors rotating out of companies like Nvidia Corp. and Meta Platforms, the pair may be the next stocks to exit the top 10. Health-related companies — insurer UnitedHealth Group Inc. and industry titan Johnson & Johnson — sit just outside of the top 10 — though they’re each more than $56 billion in value behind Facebook’s parent company.
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At the height of the dotcom bubble in 2000, when the idea of a company with a $1 trillion market value seemed far-fetched, a Credit Suisse analyst posited that Cisco Systems Inc. would be the first to achieve that milestone. Cisco’s capitalization peaked that year at about $550 billion. Since then, it’s been mostly downhill for the maker of networking equipment: The stock slumped 87% from its peak in March 2000 to its bottom in October 2002. It’s still 32% below the high, valuing the company at $227 billion.
If you’re wondering, energy company PetroChina Co. briefly became the first $1 trillion company in late 2007 but slumped quickly as oil collapsed in the financial crisis. Apple and then Amazon.com Inc. reached the milestone in 2018.
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