US stocks are some of the biggest companies in the world.
They’re also very 'different’ from traditional companies in many ways.
In this week, we’ll explore US tech stocks.
First, let’s talk size.
Out of the biggest 10 companies in the world, 7 are tech companies. Out of that, 6 are US tech companies.
best us tech stocks
1. Apple (AAPL)
2. Microsoft (MSFT)
3. Amazon (AMZN)
4. Alphabet/Google (GOOGL)
5. Facebook (FB)
6. Tesla (TSLA)
7. NVIDIA (NVDA)
8. PayPal (PYPL)
9. Adobe (ADBE)
10. Salesforce (CRM)
us tech stocks report
Apple, the biggest company in the world sells premium gadgets across the Earth. Microsoft runs most computers around the world. Google is used by practically all internet users anywhere. Amazon sells items to all of US, parts of Europe, and parts of Asia.
These companies through their scale and reach have access to the highest number of potential customers across the globe.
US tech stocks are infamous for being not-profit-generating in the early days.
Many companies reinvest their earnings to grow bigger.
US tech companies tend to do this more so. In fact, they even take money from other investors so they can spend it on expanding their business.
The biggest tech companies all raised money from investors in exchange for a stake in the company.
This is the reason why a majority of the shares of these companies are owned by investors, not the founders. In short, they are not family businesses.
Many tech companies are not profit generating at the time of their IPO. Amazon was infamous for not generating a profit for years even after its IPO.
PE ratio of US tech companies.
PE ratio is basically, the ratio of the stock price to the earnings (per share) made by a company.
A higher PE ratio means the stock price is higher compared to the earnings of the company.
US tech companies are known to usually command high PE ratios.
Usually, high PE ratios are observed when investors feel the company will make higher earnings in the future.
They’re basically paying a more ‘fair’ stock price factoring in a future where the company’s earnings are much higher.
As we discussed on an earlier day of this course, tech companies have immense potential to grow because of their easy-to-scale nature over the internet.
Hence, people expect higher profits from them in the future.
Of course, these tech companies can fail too — success and future profits are never guaranteed.
US tech companies are some of the most powerful companies in the world by the sheer number of users they have and how integral their products are.
Think about it — when Toyota sells you a car, the car is yours. End of story.
But when you use WhatsApp, Facebook, Google, Youtube, etc, the company continues to get very deep insights about you.
Using these insights, they can offer products and services to sell to you further making you even more deeply dependent on their platforms.
Couple that ability with the sheer number of users each of these companies serves around the world, and you have incredibly powerful companies.
Their power is such, many times these companies refuse to abide by local countries’ laws — which has both a positive and negative side but that’s a story for later.
