Amazon is now the world’s second most valuable company, overtaking Google’s parent Alphabet.
The retail, technology, Web services – and soon delivery – company has added $350 billion to its market capitalisation over the past year, according to the FT.
Amazon’s stock market value today stands at $766 billion – $1 billion more than Alphabet’s, but still a long way behind Apple, whose market capitalisation (the value of all its shares on the market) is currently just over $883 billion.
Of course, all of that may change tomorrow, but the news has helped restore some of Wall Street’s faith in technology stocks in the wake of the scandal over Facebook data being used by Cambridge Analytica to micro-target US voters.
• While AI and analytics provider Cambridge Analytica might claim that is was simply providing a form of rarefied psychometric profiling to its high-spending clients, Channel 4 reports this week have revealed an underlying political motivation across all of its actions.
Facebook, Twitter, and other social platform providers have all been hit by the controversy, although Twitter saw an even higher slump in value than Facebook.
As a data-focused and advertising-driven organisation at heart, Google/Alphabet has not been not immune from the social sell off: its stocks declined in value by 3.5 percent this week.
But why is all this important?
Internet of Business says
Although short term and inconclusive in themselves, these stock movements indicate that companies that provide a quantifiable service beyond connecting people are currently more valuable, and investors see greater long-term value in them.
Amazon’s diversification into the Internet of Things, smart home devices, connected technology, automated distribution, and even delivery services suggest that it is the king in waiting, matched only by Alibaba in China, perhaps – in these value terms at least.
The world’s most valuable company, Apple, also lives in a technological walled garden, but its premium hardware and ecosystem of lifestyle products and apps mean that it has limited room for manoeuvre into services that are all about end-user convenience, cost-savings, and speed. This is where Amazon can play.
Much of what Apple does may be beautifully designed – iTunes aside – but it can never pile hardware high and sell it cheap to encourage its customers into a data- and loyalty-based retail relationship, as Amazon can.
But it’s worth bearing in mind that being the world’s most valuable company is not the same as being the world’s biggest company by revenue. By this measure, only Apple makes the top 10 out of all the tech giants.
By revenue, another company easily dominates: US retail giant Walmart, with revenues of $485 billion, followed by three Chinese companies: State Grid ($315 billion), oil and gas giant Sinopec ($267.5 billion), and China Natural Petroleum ($262.6 billion). Toyota and Volkswagen make up the rest of the top six, in a top 10 that is dominated by oil and energy providers.
Apple languishes at number nine, with revenues of $215.6 billion – $10 billion more than Exxon Mobil, but only one-quarter of its world-leading market cap.
This disparity between one measure of Apple’s size in the real-world (its revenue) and its perceived value (market capitalisation) is interesting. And the same applies to all technology companies.
That the top 10 largest companies in the world is a completely different list to the top 10 most valuable companies reveals something simple: the former is a list dominated by old economy giants, and the latter by new economy behemoths. Bricks versus clicks; commodities versus bits.
This should serve as a reminder that while technology stocks may be investors’ darlings, and while data is often described as “the new oil”, the old oil still dominates the world of real-world money exchange.
(Of course, news that Volkswagen is refocusing its entire business on electric vehicles represents a culture shift away from oil, but energy generation remains the bit of the old economy that technology can’t exist without.)
News that Walmart is taking out a number of patents in robotics technology – in agriculture and other areas – should make Amazon sit up and take notice, therefore. As should news that Walmart is moving into deliveries and planning to vertically integrate many aspects of its business.
Walmart the new technology giant? Don’t bet your shirt against it uniting the old and new worlds.