Which companies could overtake Big Tech’s Big Five?
- The American Big Tech's dominance could see a decline over the next decade due to antitrust and tax crackdown
- Invezz predicts six industries and companies within them that could dethrone members of the Big Five
- One of them is Chinese tech giant Tencent which spans chat, gaming, e-commerce, payments and more
While the coronavirus pandemic has battered small businesses around the world and sent industries like hospitality and aviation into crisis, times have been good for many of the world’s megafirms.
The 100 biggest technology companies grew by a cumulative 71% in the year from March 2020, and those at the very top – the so-called ‘Big Five’ of Apple, Amazon, Microsoft, Alphabet (parent company of Google) and Facebook – saw record sales and profits, surpassing analysts’ and their own expectations.
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The combined market value of the Big Five as of Q1 2021 was over $8 trillion, which accounts for nearly a quarter of the total value of the companies in the S&P 500. According to the Wall Street Journal, that’s nearly double the percentage it was five years ago. None of these firms even ranked among the top five S&P 500 companies in the 2000s.
While their position seems untouchable now, history suggests that no one stays on top forever. The world changes – IBM was the world’s biggest company for decades and dominated in fields like punch-card processing machines and computer mainframes, but these technologies are no longer cutting-edge enough to top the list.
Of course, while they’re often grouped under a shared moniker, the Big Five do very different things; so they are likely to face different fates in this regard. While Facebook has made savvy purchases in popular platforms like WhatsApp and Instagram, its continued popularity over the 2020s seems a lot less assured than, say, demand for Amazon’s goods delivery and cloud computing services.
What the Big Five certainly share is the disgust they inspire in some quarters. They have been branded “monopoly powers,” and their bosses have been called “cyber barons” in the US Congress. They’ve variously been accused of exploiting user data, exploiting their own workers and exploiting societal divisions. That’s not to mention the fury mounted on them over alleged tax minimisation.
While it’s probably too late to roll back the wrenching cultural and societal shifts they’ve unleashed on the world, it seems likely more will be done by governments and regulators over the coming decade to squeeze more taxes out of them – a process that’s already kicked off – and to reduce their market dominance. That could even mean the US, where all are based, breaking them up.
So which companies have a shot at dethroning members of the Big Five? They will almost certainly need to become trillion-dollar businesses to do so, no easy feat. Expert opinions on which will do so differ – but we’ve highlighted six industries and companies within them that could be contenders.
They include TSMC, a Taiwanese chipmaker that has been described by the Financial Times as “a linchpin of the global economy” and has seen its market capitalisation soar since 2018. According to its CEO C C Wei,
as we enter the 5G era, a smarter and more intelligent world will require massive increases in computation power and greater need for energy-efficient computing –
which the company plans to provide.
Will TSMC become a trillion-dollar firm?
With a current valuation around $620 billion, it has some way to go. Invezz lead editor, Jayson Derrick comments:
The company said in April it will spend $100 billion over three years to lift its capacity amid the current chip shortage. The only problem: the company is roughly $72 billion shy of its plans, so fuelling growth via debt isn’t a story new investors will be interested in.
Even further off from the trillion dollar valuation milestone is Salesforce, a cloud computing company which has nonetheless grown quickly over the last five years (it’s currently worth around $228 billion). CEO Marc Benioff has said he expects the company to surpass $50 billion in annual revenue in five years. As a leader in cloud-based customer relationship management that is currently attempting to acquire cloud-based communication platform Slack, it could well hit a trillion-dollar valuation by the 2030s.
Then there’s electric vehicle maker Tesla, which experienced staggering growth in 2020 and now dwarfs all other automotive firms. Long-term Tesla investor Ron Baron thinks Tesla will generate $1 trillion in revenue by 2030, which by all accounts implies it will be worth well above and beyond one-times sales.
Will the Chinese tech giants take over the American ones?
Though they have faced their own antitrust crackdown and US hostility, it wouldn’t be too much of a stretch for Chinese tech giants like Tencent and Alibaba, which currently rank 6th and 8th in a ranking of the world’s biggest public companies, to hold regular spots in the top 5. E-commerce firm Alibaba has done so before. There are good reasons to think Tencent, which spans chat, gaming, e-commerce, payments and more, will become a trillion dollar company.
However Mark Greeven, Professor of Innovation and Strategy at IMD Business School and author of Business Ecosystems in China: Alibaba and Competing Baidu, Tencent, Xiaomi and LeEco, is more sceptical that Chinese big tech will reach a higher valuation than American big tech.
Most of the Chinese companies, even though they are expanding globally, cannot be compared to how global many of the American big tech companies are. That puts a limit on their potential valuation. Additionally, the Chinese government is much stricter. Its regulator takes real, tangible actions and implements laws to govern and regulate Big Tech in China. That means less freedom to use quick ways to grow as they have in the past,” Greeven told Invezz.
Greeven also noted that while these constraints will impact Chinese tech companies’ market valuation, it doesn’t mean the companies will not be as impactful or innovative as their US counterparts.
One firm we haven’t included is Netflix, which sometimes replaces Microsoft in listings of the Big Five tech firms. Invezz’s Jayson Derrick comments:
In order for Netflix to catch up to its high-tech peers it needs to double its valuation — and then double once again. This is likely an infeasible task as a sharp slowdown in subscriber growth makes the case that its days of growth are a thing of the past.
While not currently juggernauts, a firm in the fields of healthtech or green energy could also see massive growth in the coming decade. UBS’s Year Ahead 2021 report said the industries would be among the “disruptors set to drive technological transformation over the decade ahead,” helping make the world more digital and sustainable.