Stocks of Apple, Amazon, Alphabet, Microsoft, and Facebook rose a combined 37% in the first seven months of 2020, while all the other S&P 500 stocks fell 6%
As the economy contracts and many companies struggle to survive, the biggest tech companies are amassing wealth and influence in ways unseen in decades.
Context & Ripple Effects
The five largest tech names were already an outsized force before the pandemic: in February they accounted for roughly 18% of the S&P 500 by market value, after a 2019 run that lifted Apple, Microsoft, Alphabet, and Facebook despite trade-war and regulatory headwinds (coverage here). What changed by August is the divergence itself — a 37% combined gain against a 6% decline for every other S&P 500 stock.
The mid-year numbers show where the wealth went: Amazon added roughly $401 billion in market cap year-to-date, Microsoft about $270 billion, and Apple around $219 billion, per the FT's top-100 tally (June snapshot). The story matters because index-level returns are now effectively a bet on five balance sheets.
First-order effects
- Passive index investors' returns are now dominated by five companies: with the rest of the S&P 500 down 6%, funds tracking the index post gains only because of the Big Tech weighting.
- The five companies gain purchasing power precisely when the broader economy contracts — cash-rich buyers facing distressed sellers across sectors.
Second-order effects
- Fund managers benchmarked to the S&P 500 face pressure to concentrate further into the same five names, since underweighting them means lagging an index they already carry at ~18%.
- Acquisition and hiring leverage tilts toward the five: their inflated equity is cheap currency for absorbing struggling companies and talent while rivals retrench.
Third-order effects
- If concentration keeps compounding — as it did again in 2023, when Microsoft, Alphabet, Amazon, Meta, Tesla, Apple, and Nvidia posted a median 43% gain on AI optimism (Bloomberg's tally) — index construction itself becomes a structural amplifier of Big Tech dominance, raising antitrust and market-stability questions regulators have already flagged.
The trend: Market-cap concentration in a handful of tech platforms is turning broad equity indexes into leveraged bets on those few firms, with each crisis cycle accelerating the consolidation.