A $2tn bite of the Apple: Another look at Apple overtaking the value of the entire FTSE 100

September 23, 2020

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3 min read

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What's going on here?

Following its $2tn valuation on 19 August, US tech behemoth Apple is now worth more than the whole FTSE 100 index, which comprises the UK’s 100 largest publicly listed companies (for more see our story on it here). We take a further look at what this means for the technology sector and how Apple is beating the downward lockdown trend.

What does this mean?

Apple has certainly been a pandemic winner. This year, its share price has risen by 75%, more than doubling since March when coronavirus-induced panic hit global stock markets. Fortunately, investors have been keen to capitalise on technology companies, as the demand for tech has increased rapidly as a result of businesses requiring employees to work from home. 

Apple continues to make inroads that not only make investment easier for small-time investors, but also convince consumers to keep coming back. Share demand has already been lifted following the company’s decision to swap four new shares for every old one that investors held, and Apple are reportedly in discussions with suppliers regarding production of at least 75m 5G iPhones for later this year. 

These inroads are likely to support Apple’s growth in wearable products, which include the Apple Watch and AirPods. In Q2, wearables and the Apple Music service made more than $13bn, supporting the view that the company has been a clear beneficiary of the pandemic.

What's the big picture effect?

This story highlights the current confidence in the technology sector. Companies in technology and e-commerce have benefitted enormously as consumers have turned towards digital services for shopping, working and entertainment during lockdown. 

Analysts have noted how limited tech stock is on the FTSE 100, which is a plausible reason for Apple’s landmark accomplishment. In comparison to the US Nasdaq index, which boasts several large tech companies including video conferencing platform Zoom, the FTSE 100 is littered with sectors severely affected by the pandemic, such as brick and mortar retailers and aviation. According to the International Air Transport Association, the aviation industry is expected to report losses upwards of $84bn for 2020, and 20,000 brick and mortar closures are anticipated by December. Perhaps unsurprisingly therefore, FTSE 100 trading is currently down 22% from January levels.

It is also worth noting that markets trading stocks, bonds and commodities are facing overvaluations due to the economic uncertainty. A bond is a type of debt, creating a payment of a large sum of money and a maturity date on which the loaned money must be paid back, while a commodity is a basic good that is interchangeable with others of its type, such as a barrel of oil or a foreign currency. Trading of bonds and commodities is intrinsically linked with economic confidence; a lack of supply and demand within commodities markets leads to a reduced price, and a low interest rate means that bond prices surge. Similar principles impact the stock markets as fluctuations in share prices is an indicator of economic volatility.

Meanwhile, Apple has not gone unnoticed recently by competition regulators and consequently, these groups may raise some eyebrows over its recent valuations. Apple appeared alongside Amazon, Facebook and Google before US lawmakers amid claims of monopolisation over smaller competitors. Any malpractice could lead to harsher regulation in terms of expansion, conflicts of interest and handling of user data, and may also result in future acquisitions or investments facing high regulatory scrutiny and completion difficulties. 

Nevertheless, Apple is showing no signs of slowing down. It has the scale and captive market to leverage further capital growth, and the innovation to continue going from strength to strength, as businesses frequently lean towards an evolving technological landscape.

Report written by Evangeline Taylor

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