Technology stocks are on a tear the past few years. In 2019, the NASDAQ index rose over 35%. With the arrival of the pandemic in 2020, the NASDAQ shot up again by over 43%. It remains to be by much it will grow this year.

The top five companies – Facebook(FB), Apple(AAPL), Amazon(AMZN), Microsoft(MSFT) and Alphabet(GOOG) –  leading the index have steadily grown their market capitalizations since 2013 as shown in the graphic below. From $1.13 Trillion in total market cap at the end of 2012, these five giants’ market cap reached an astonishing $7.5 Trillion at the end last year.

To put this number in perspective, the US GDP was estimated be over $21.0 Trillion in 2020. So just these five firms have a market value of one-third of the US GDP ! And the expectation is they would continue to rise even further.

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Source: How Big Tech Got Even Bigger, WSJ

Much of the growth in recent years has come from P/E expansion as investors bet on potential growth in the future. For example, Apple’s P/E of around 37 is much higher than what it was three years go. Currently Apple(AAPL) has a market cap of $2.3 T.

Facebook’s P/E is over 26 while Amazon’s stands at an astonishing 80.Microsoft is no longer cheap either with a P/E of over 36.

Disclosure: No Positions