Amazon became the largest company by market capitalization on Monday, surpassing Microsoft . Apple, which has been the most valuable company for years, now ranks fourth, with shares plummeting 36% over the past three months, including a 10% decline on Jan. 3, when the company cut its quarterly revenue forecast for the first time in more than 15 years. .

Leaders regrouping

Microsoft , whose shares did not fall as much as Apple's during the market decline at the end of last year, has established itself in 1st place since the beginning of December. But earlier this year, investors began actively buying Amazon shares, which rose 8.5% after a quarterly decline of 25%: after all, the online retailer could announce revenue growth in the fourth quarter by 20% compared to the same period 2017, according to analyst forecasts compiled by FactSet.

Shares of the largest technology companies, which were previously the leaders of growth, fell more than the US stock market as a whole in the fourth quarter of 2018: the Nasdaq 100 index lost 17% versus almost 14% for the S&P 500. Nevertheless, they remain the world leaders. Amazon's market value was $796.78 billion on Monday (it briefly hit $1 trillion in September), Microsoft 's was $783.57 billion. Google's parent company Alphabet's market value was $745.63 billion, and Apple, which peaked early October was worth $1.1 trillion, – $701.99 billion.

Next by a wide margin is Warren Buffett's Berkshire Hathaway ($485 billion based on Monday's trading results), ahead of Facebook , whose shares have fallen by 36.5% since the end of July 2017 due to a series of scandals, primarily related to the protection of user data . JPMorgan Chase and Johnson & Johnson, leaders in their sectors, have capitalizations of less than $350 billion, while retail giant Walmart has a capitalization of $271.5 billion.

Leading technology companies are here to stay, says Michael Lippert, manager of the Baron Capital Opportunity Fund. They operate in large markets "and neither Amazon nor Microsoft have exhausted them yet; they still have a lot of room to grow," he told The Wall Street Journal.

The four leading technology companies, once specialized and leading in their fields, are now increasingly competing with each other, the WSJ notes . Thus, Amazon, Microsoft and Google are the largest players in the cloud services market, which Amazon actually invented about 12 years ago (and Apple, according to UBS, earned $3 billion in fiscal year 2018 with its iCloud cloud service). Gartner forecasts that this sector will grow from $25.3 billion in 2017 to $65.9 billion in 2021.

If at first only Apple produced computer devices, now Microsoft has Surface and Xbox, Amazon has Kindle, and Google has Chromebooks (in partnership with other manufacturers), through which companies promote their services. Google competes with Microsoft in software, which competes with it in search. Amazon, Google and Apple have their own voice assistants, while Microsoft uses it on devices from other manufacturers. Amazon is already engaged in content production, and Apple is expanding this business. Companies are actively working in areas such as artificial intelligence, self-driving cars, etc.

Is the tech sector gone?

However, the ubiquity of technology means that the idea of “tech stocks” as a separate group of companies emerging from the development of computer technology and the Internet is becoming outdated, notes the Financial Times. Evidence of this can be considered the largest industry reclassification, which was carried out in September 2018 by index providers S&P Global and MSCI. Thus, in the S&P 500 index, 13 companies from the consumer sector, six from the information technology sector and three from the liquidated telecommunications services sector were transferred to the new Communication Services sector.

From the information technology sector (where, however, Apple remained), in particular, Facebook , Twitter, Alphabet, Chinese Tencent and Baidu were withdrawn, which ended up in “Communication Services” - along with Netflix and eBay (withdrawn from the consumer sector), Verizon and AT&T (withdrawn from telecom). Amazon remained in the consumer sector along with McDonald's and Ford Motor.

The reclassification, some market participants say, contributed to high volatility in the fourth quarter, as index and exchange-traded funds had to shift billions of dollars from their portfolios to other stocks. But more importantly, Vincent Deluard, macro strategist at INTL FCStone, notes in the report: the index providers' decision was "an admission that the technology sector is no longer something special" and "has ended the technological age."

Traditional companies are conquering the territory of their Internet competitors (Walmart already sells almost as much online as Apple, Deluard points out), and they are moving in the opposite direction: Netflix, for example, said it will spend $13 billion on producing its own content in 2019 ( about 90% of revenue). In the fintech sector, traditional money managers such as Fidelity are now offering robo-investment advisors, and robo-advisor specialist Nutmeg has begun offering advice from live experts. While banks began digitalizing services, fintech startups Zopa and Monzo received banking licenses, the FT lists. Breakthrough technologies are now emerging not from Facebook and Netflix, but from areas such as climate science, stem cell research, aerospace and manufacturing, the newspaper notes.

All this means that shares of both those companies that were considered technology and those that were perceived as non-tech will be overvalued, Deluard believes. “If technology is now everywhere, then the technology sector no longer exists,” he writes. – And if it no longer exists, then the premium on its shares is unjustified: in terms of the ratio of capitalization to projected earnings (P/E), the premium for the Nasdaq 100 index over the S&P 500 index has fallen to 16%. If both Netflix and Walt Disney use technology to tell stories, why does the former have a P/E of 88 and the latter have a P/E of 15? If both Tesla and BMW are using battery technology in premium cars, why should the former have a projected earnings P/E of 42 while the latter has a projected earnings P/E of only 5.6?”

Amazon has become the most valuable company in the world