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“ A perfect positive storm ”: bonkers dollars for big tech

During the Great Recession over a decade ago, big tech companies had a rough time, just like everyone else. Today, they have become clear winners in the pandemic economy.

The combined annual revenue of Amazon, Apple, Alphabet, Microsoft and Facebook is around $ 1.2 trillion, according to revenue released this week, more than 25% higher than the figure at the time of the pandemic began to sting in 2020. In less than a week, these five giants are making more sales than McDonald’s in a year.

The US economy starts up again from 2020, when it contracted for the first time since the financial crisis. But for the tech giants, the pandemic has barely been a failure. It’s a fantastic time to be an American tech titan – as long as you ignore screaming politicians, the daily headlines about suppressing free speech or tax dodging, complaints from competitors and corporations. workers, and too many legal inquiries and lawsuits.

America’s tech superpowers are failing to make money despite the deadly coronavirus and its ripple effects on the global economy. They got even stronger because of the pandemic. It is both logical and a little crazy.

Last year’s smashing success also raises uncomfortable questions for tech CEOs, the public, and elected officials already angered by the industry: Is what’s good for Big Tech good for America. ? Or are tech superstars winning while the rest of us lose?

Americans have more money in their pockets thanks to government stimulus checks and pandemic savings, and tech giants are getting a big chunk of that. Their combined income is equivalent to about 5 percent of the gross domestic product of the United States.

Big Tech’s pandemic has an understandable root cause: we needed its services.

People turned to Facebook apps to stay in touch and be entertained, and companies wanted to pay Facebook and Google, which Alphabet owns, to help them find stranded customers in their homes. People preferred to buy diapers and lounge chairs on Amazon rather than risk their health purchases in stores. Businesses stocked up on Microsoft software as their businesses and workforce went virtual. Apple laptops and iPads are becoming lifesavers for office workers and school children.

Before the pandemic, America’s tech superpowers already had an influence on the way we communicate, work, stay entertained, and shop. Now, they are virtually inevitable. Investors have taken shares of Big Tech in a bet that these companies are almost invincible.

“They were already on the rise and had been for the best part of the decade, and the pandemic was unique,” ​​said Thomas Philippon, professor of finance at New York University. “For them, it was a perfect positive storm.”

Times weren’t so good for these companies in the last tough economic times. During the 2007-2009 recession, Microsoft’s sales declined slightly and its stock price fell 60% between fall 2008 and March 2009, a low point for US stocks. Google and Amazon have each lost up to two-thirds of their market value.

A sign of the difference between this time around: Amazon’s revenue is growing much faster in 2021 than in 2009, when the company was one-fifteenth of its current size. First-quarter sales were up 44% year-over-year, and Amazon’s pre-tax profits – which have never been exactly strong – more than doubled to $ 8.9 billion. Businesses are addicted to Amazon’s cloud computing services, where sales are up 32%, and buyers can’t live without Amazon delivery. Investors also love Amazon. The company’s stock market value has nearly doubled since the start of 2020 to $ 1.8 trillion.

For other tech giants, it’s as if their brief pandemic dive never happened. Advertising sales generally increase and decrease with the economy. But while other types of ad spend declined when the U.S. economy contracted last year, ad sales increased for Google and Facebook. Growth has been even better for them in the first three months of this year.

A year ago, analysts feared Apple could be crippled as the pandemic gripped China, which is the center of the company’s manufacturing operations and its largest consumer market. The fears did not last long. In the first three months of 2021, Apple’s revenue from the sale of iPhones grew at the fastest rate since 2012. Sales in mainland China, Taiwan and Hong Kong nearly doubled from the previous year. ‘last year.

Tech giants aren’t the only companies rallying in dark times. The big American banks are also in tears. The same goes for young tech companies, such as Snap and Zoom, the creator of the pandemic’s favorite video conferencing app. The crisis has forced all kinds of businesses to go digital quickly in ways that could help them thrive. Restaurants have invested in online sales and delivery, and doctors have moved into telemedicine.

But the dictionary doesn’t have enough superlatives to describe what is happening to the five biggest tech companies. It’s really a bit awkward. It’s fuel for critics, including some regulators and lawmakers in Europe and the United States, who say the tech giants are crowding out newcomers and leaving everyone worse.

Big tech companies say they face fierce competition that leads to better products and lower prices, but their bank statements might suggest otherwise. Facebook’s profit margins are higher now than they were before the pandemic.

Part of their success can be explained by the peculiarities of the pandemic economy. Some people and industries are doing very well, while other families are lining up at food banks and while businesses like airlines ask for money. Unlike the stock market that erupted during the Great Recession, stock indexes in the United States have reached new highs.

Tech superstars also took advantage of this moment. Alphabet and Facebook have used the pandemic to slash areas that matter less, like promotional costs and travel and entertainment budgets. And tech giants have generally increased their spending in areas that extend their benefits.

Alphabet now spends more on expensive projects, like building computer complexes, than Exxon Mobil spends on extracting oil and gas from the ground. Amazon’s workforce has grown by over 470,000 since the end of 2019. This deepens the gap between tech superstars and everyone else.

Big Tech is emerging from the lean, mean, and ready pandemic for a US economy expected to come back to life in 2021. Meanwhile, there are still long lines at food banks. Some American workers who lost their jobs last year may never get them back. Housing advocates fear millions of people will be evicted from their homes. And being Big Tech invites everyone to hate you – but you’ve got massive piles of money.

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