The rise of the tech giants as US equity mainstays is not a new phenomenon – Apple, Microsoft and Facebook have long been poster boys for the American net dream.
With corporate earnings season in full force, does the fight for top spot between Alphabet and Apple give investors insight into the real strengths of the dynamic US economy or is it just a smokescreen for problems in more traditional areas?
Walter Price, manager of Allianz Technology Trust, suggests there is much more to come, believing Alphabet is now likely to ramp up spending, particularly on Google Fiber – its broadband and cable offering – which is being rolled out in up to 20 US cities this year.
“In general, what we have seen with both Facebook and Google is that advertising spending is doing well during this uncertain economic period because of the high and demonstrable returns from that spending,” he says.
Picking up on this point, Michael Stanes, investment director at Heartwood Investment Management, believes that innovative growth industries, such as software, should be better positioned to outperform in a moderate growth environment.
He adds: “In software, which continues to benefit from the secular drivers of cloud computing, applications and cyber security, headlines have been dominated by concerns about Apple’s ability to grow its product offerings, particularly as demand in China slows.
“Some forecasts suggest that full year revenues for the fiscal year 2016 will decline, which would be the first time since 2001. It is not all bad news though, as Apple sits on a $200bn cash pile.”
