Big tech – Apple, Amazon, Facebook, Alphabet show rally was no fluke?

Four of the big 5 tech companies, which include Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) put on a show with earnings Thursday, as the near collective $5 trillion in market value helped lift the Invesco QQQ (NASDAQ:QQQ) ETF higher in after hours trading amid stronger than expected quarterly results.

All beat expectations, which had logically dipped, creating a lower bar (e.g. see AMZN’s expectations trajectory here, and Alphabet’s here) as the pandemic crisis ensued, but the  companies, with the exception of Google parent Alphabet, showed top-line revenue growth, showing the tech-centric companies are flourishing in light of the crisis.

It’s not news, given the work-from-home trend has led many prognosticators to espouse an accelerated tech trend. Indeed, PC shipments were up 11% y/y in Q2, with HP (NYSE:HPQ) and Lenovo leading the way.  But the concentration of value in big tech led some to indicate investors may have gotten ahead of themselves, so much so, that Fundstrat’s Tom Lee last week opted to dispute such a characterization of the mega-cap tech’s concentration in the S&P 500. 

Sitting then at 22%  of the S&P 500’s market cap, he argued that the companies comprise 18% of the S&P’s earnings and are more than 80% of earnings growth, showing investors may not be out of step with fundamentals after all, despite the fact that the names led most of the market cap-weighted S&P’s recovery from the March lows.

Some indications are that investors were beginning to look for alternatives, as JPMorgan’s program trading desk started to see interest from more investors of a willingness to move to the equal-weighted S&P (NYSEARCA:RSP). Right on cue as investors began to shift sentiment, big tech surged with numbers to back up the rally.

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Apple delivered with revenue growth over 10%, led by the iPhone, while Amazon and Facebook also delivered. Amazon’s revenue was up 40%, outpacing last quarter’s 23% y/y growth. Facebook’s growth last quarter was in excess of 20%, and notched 11% y/y growth in its latest quarter.

Find Amazon’s growth metrics here, Apple’s growth measures and comparisons here and Facebook’s at this link. 

Bulls still exist on the sector, though its unclear how they are to weigh in after the tech juggernauts beat expectations. WingCapital Investments wrote on Seeking Alpha Monday that “the top is not yet in” on the Nasdaq, despite its 20% performance YTD. Read further here. 

And those looking for alternatives to the QQQs, the Integrator wrote that same day that there are alternatives he likes and owns, with tickers that spell: AALTT.  Names the writer discusses he owns include Alteryx (NYSE:AYX), to name a few. You can read about those here.



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