The investment story of the year is undoubtedly how significantly the big five US tech companies have outperformed the rest of the market. But the trillion-dollar question is: do these businesses still offer value?
The lockdowns, remote working and social distancing required by the pandemic have significantly accelerated the adoption of digital solutions. As an indication of how quickly demand for digital services is growing, Microsoft CEO Satya Nadella said recently that two years of online adoption growth happened in two months.
As an active, bottom-up investor, we own businesses based on their individual merits. These include whether they have superior business models, their market position is defendable, they can grow their market share, and there are other supportive secular drivers. The potential for growth in the sector remains strong. While cloud penetration of IT services has doubled over the past five years, it still only represents 14% of back-end IT spend, which gives it further room to grow.
Concerns have also been raised about the fairness of their treatment of employees , suppliers and customers .