Barry Ritholtz postulates that the reason why big tech stocks are heading to the moon is because of the “overseas markets.”
Apple generated more than 55% of its revenue outside the U.S. in the year ended in September; in some quarters, overseas accounted for as much as 60% of revenue. International accounted for 54.5% and 53.8% of Facebook and Alphabet revenues, respectively. For Microsoft and Netflix, the split is about half domestic and half overseas (49.0% and 49.4%, respectively). Amazon is the Big Tech exception, generating a sizable majority of its revenue within the U.S. What makes overseas so important, though, is because that’s where the growth is.
It doesn’t surprise me — the market in the US has gotten quite saturated. And the global stage is still an opportunity for growth for the large technology companies — much like the heyday of American consumer and entertainment brands such as McDonald’s, Coca Cola, Pepsi, Disney, and other moviemakers. Technology brands and products are just the latest in this line-up of American exports.
However, Barry makes a very tenuous correlation between our administration’s botched response to the pandemic and good fortunes of tech sector. As rest of the world done better in terms of managing the crisis, it has helped the economies in those countries. I would argue that most of these companies have been on an upward trajectory overseas for a while — COVID or no COVID, they would still continue to thrive. The stock market performance of these stocks is reflecting the inevitability of the Internet and mass shift to an intelligence economy.
As a word of caution, markets are underscoring the risk of Balkanization of the Internet and technology, which can prove to be detrimental for large tech. There is a reason why Facebook, Google and others are lining up to pump billions into India and other countries before it is too late. Money buys them clout — and access.
Listen to this episode of my podcast with Ophir Gottlieb to learn more about the stock markets and how to deal with their up-and-down nature.