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Increasing regulatory risks affected valuation of some major global technology companies in Q1 2021, says GlobalData

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The overall MCap of the top 25 global technologycompanies increased 3% in Q1 2021 despite the fact that Apple and Amazon cumulatively shed over $280bn in valuation, according to GlobalData, a leading data and analytics company.

Keshav Kumar Jha, Business Fundamentals Analyst at GlobalData, comments: “Apple’s strong Q1 financial performance could not prevent its stocks from taking a major hit in the wake of increasing inflationary pressure and looming regulatory risks such as antitrust scrutiny and divestiture of big tech firms to forestall them from creating an anti-competitive environment.

“Even Amazon – the big beneficiary of pandemic-driven shift in shopping behaviour – could not remain unaffected by these risks and its valuation declined around 5%.”

Microsoft and Alphabet seemed to win over investors’ confidence with the performance of their cloud business and their performance remained strong during the tech stock sell-off period. Both companies reported over 45% growth each in their cloud business in respective periodic reports released during Jan-March 2021.

Jha continues: “Apart from cloud, investors also remained bullish about Alphabet’s online advertisement business. Facebook kept investors interested in its stock through renewed focus on e-commerce to connect small businesses to its platform.

“The company’s e-commerce push could also help increase demand for advertising on its platforms through the shift of commerce from traditional brick-and-mortar to online retailing.”

Semiconductor companies, excluding Qualcomm, demonstrated robust MCap performance during Q1 with their cumulative valuation increasing over 10%.

Jha continues: “The sliding of Intel’s share price came to a halt in Q1. Its announcement on management changes, timely progression in resolving issues with 7nm process technology, and improved Q4 earnings helped the company regain investors’ confidence.”

Despite improved Q1 earnings, concerns related to the shortage of chips and some profit booking activities resulted in Qualcomm’s share price falling more than 10% during Jan-March this year.

Jha concludes: “The massive fiscal stimulus being rolled out worldwide to help revive the economy could keep sentiment positive in the market. However, increasing demand for bringing in anti-trust laws to check anti-competitive activities of large corporations alongside heightening inflationary pressure could pose challenges to major tech companies in 2021.”

*Technology companies include software and hardware developers, IT service providers (including internet-based service providers), and manufacturers of electronics, including semiconductors and mobile devices. GlobalData ranks the Top 25 companies based on MCap performance.