Did the FAANG+ Stocks Have Their Teeth Pulled

Did the FAANG+ Stocks Have Their Teeth Pulled

February 09, 2023

In 2022, the top 10 tech stocks lost $4.6 trillion in market cap (Japan’s GDP)

After years of crazy growth, the tech sector was hit particularly hard in 2022, with the NASDAQ turning in its worst year since 2008, as it lost about 33%.

And the big, household, tech names underperformed significantly in 2022 too, causing investors to wonder whether the FAANG stocks (and Microsoft) have lost their teeth.

If you don’t know, the term FAANG is an acronym for five technology names – Facebook (Meta), Apple, Amazon, Netflix and Google (Alphabet).

Let’s examine the change in market cap for a few of the household names in 2022 – let’s call this new group the MAAAM stocks (nowhere near as cool-sounding as FAANG): Facebook (Meta), Amazon, Apple, Google (Apple) and Microsoft. 

Trillions in Market Cap Lost in 2022

In terms of market caps, the 10 top tech stocks lost a combined $4.6 trillion in market cap in 2022 and much of that was attributed to the MAAAM names.

For perspective, that $3.5 trillion loss is bigger than the entire size of India’s Gross Domestic Product (GDP) ($3.4 trillion). It’s also bigger than the GDP of the United Kingdom ($3.1), France ($2.7) and about 50% bigger than Russia’s annual GDP.

Sizes Within the Overall Market

Here are a few other things to note:

The Information Technology sector makes up about 27% of the market weight of the S&P 500, which tracks the performance of 500 widely held, large-capitalization US stocks (by way of comparison, the Tech sector comprised about 34% of the S&P 500 during the tech bubble in March 2000).

Take a look at these numbers:

  • Facebook is 0.7% of the market;
  • Amazon is 2.4% of the market;
  • Apple is 6.6% of the market;
  • Netflix is 0.4% of the market;
  • Google is 3.3% of the market; and
  • Microsoft is 5.4.% of the market.

In other words, these 6 names comprise almost 20% of the total market.

(Note: be careful when making comparisons, as Amazon is in the Consumer Discretionary sector, not the Information Technology sector. In addition, Facebook (Meta) and Google (Alphabet) are both in the Communications sector).

Notwithstanding the above note, the point to remember is that while some might be worried that losses (and gains) are driven by so few names, there is something else to remember too: that’s usually how it works with market-cap weighted indices – very few names usually account for the majority of the gains.

A Perspective to Consider

From the viewpoint of a financial professional, their perspective may be pretty straightforward: if you only own just the FAANG or MAAAM stocks – or even a few stocks – you are simply not diversified. Period.

Please reach out to us to discuss your options.


Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. All indexes are unmanaged and cannot be invested into directly.

Because of their narrow focus, investments concentrated in certain sectors or industries will be subject to greater volatility and specific risks compared with investing more broadly across many sectors, industries, and companies.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

The NASDAQ-100 is composed of the 100 largest domestic and international non-financial securities listed on The Nasdaq Stock Market. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology, but does not contain securities of financial companies.

This article was prepared by FMeX.

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