Is Apple still ahead of the pack? Or did Microsoft or Amazon manage to pull it off? And what about Google and Facebook? These giants have been in a tight race for the title of the most valuable publicly traded company for quite some time. As of August 2, 2021, just days after they had reported second-quarter earnings, the winner was still Apple. The Cupertino powerhouse has dominated the list since 2020, when it also became the first American company to reach a market valuation of $2 trillion, and its valuation has only grown since then—to about $2.4 trillion. Will it hit the $3 trillion mark? Analysts and investors alike seem to believe so.
Yet, the stock value of a company can change quickly. Apple itself has experienced several setbacks. Microsoft briefly dethroned it as the most valuable enterprise in the world in 2018, Amazon beat both companies for the top slot in January 2019 but Microsoft took it back a month later. Then Apple regained the lead in October 2019, only to lose it to Microsoft in February of 2020. Microsoft's dominance did not last long. After releasing stellar earnings, Apple surged to the top of the ranking in June of last year, where it has stayed ever since. Fast forward to today, and we might see the tables starting to turn again. Apple’s most recent fiscal results were first-rate but perhaps not so stellar, Microsoft—which has just recently closed above $2 trillion in market cap for the first time—smashed expectations, hence so forth getting another shot at surpassing the archrival in the near or not too distant future.
But how can we make sense of all the ups and downs in the valuation of these two tech pioneers? For most of the past decade, Apple's stock price has been both the beneficiary and the victim of the company's phenomenal success. While sought-after products like iPhones, computers and tablets propelled Apple to new heights, whenever sales appeared to slow so did the company’s market capitalization. By contrast, Microsoft's business model has always been centered around steadily growing streams of recurring revenues. You might not need a new smartphone or laptop every year, but if you purchase a software license, a cloud package or a videogame subscription, you will likely buy one again in the future.
Eventually, Apple started borrowing from Microsoft's playbook: it launched news and games subscriptions, a video streaming service, and even its own credit card. Once Apple moved beyond hardware to software and services, its revenue growth became unstoppable.
To be clear: companies of all shapes and sizes can play the steady and predictable stream of revenue game. Amazon, Google and Facebook are certainly among them. Today they are all $1 trillion-plus companies, and along with Apple and Microsoft, these` top 5 US firms make up for roughly 20% of the S&P 500 index's entire market value.
Successful strategy (and product, and timing, and management) aside, the total dollar value of a company’s outstanding shares can be affected by a myriad of other unpredictable factors such as pandemics and politics. It was not too long ago when a controversial tweet by former US President Donald Trump could send stocks spiraling downward. Today’s stock market's biggest bogeyman is the risk of higher inflation. The pandemic too, of course, is not yet behind us: the so-called stay-at-home stocks that gained in value amid shutdowns and remote working last year dropped when vaccines became available; at the same time, airlines, hotels and other stocks that could benefit from the reopening of the global economy surged. When fears that the Delta variant could derail the recovery, they nosedived again.
While most of the world’s highest-valued companies are American, a few exceptions prove the point: Chinese technology firm Tencent and microchip maker Taiwan Semiconductor vaulted into the top 10 only in recent years (Alibaba, which just a year ago boasted a bigger valuation than Facebook, has slipped to 11th position after becoming the target of an antitrust investigation by the Chinese authorities). Their rise marked a shift not just in the geographical composition of the list, but a sectoral one as well. Until a decade ago, the most capitalized enterprises on the stock market were traditional long-standing blue-chip behemoths like Exxon, General Electric and AT&T. Today it is almost all tech companies.
Focusing too closely on ever-changing share prices, investor sentiment and political events rather than on underlying fundamentals can be misleading. Even in these tumultuous times, many publicly traded companies are not dramatically different in terms of market share, cash flow or employee headcount than they were a year ago. It stands to reason that their growth prospects might have changed in relation to the current circumstances—but those too, as we know, can both evolve or evaporate relatively quickly.
This is why Fortune's annual Global 500 list ranks the world’s top corporations by revenue instead of market capitalization to determine which is truly the largest. Published every year since 1995, the Global 500 list provides a bird's-eye view of the most important long-term trends in global markets.
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