Apple logo is seen on the Apple store at The Marche Saint Germain in Paris on July 15.Gonzalo Fuentes/Reuters
It took Apple 42 years to reach US$1-trillion in value. It took it just two more years to get to US$2-trillion.
Even more stunning: All of Apple’s second US$1-trillion came in the past 21 weeks, while the global economy shrank faster than ever before in the coronavirus pandemic.
On Wednesday, Apple Inc. became the first U.S. company to hit a US$2-trillion valuation when its shares climbed 1.4 per cent to US$468.65 in midday trading, though they later declined and ended the day flat. It was another milestone for the maker of iPhones, Mac computers and Apple Watches, cementing its title as the world’s most valuable public company and punctuating how the pandemic has been a bonanza for the tech giants.
See also: Big tech’s domination of U.S. business reaches new heights
As recently as mid-March, Apple’s value was less than US$1-trillion after the stock market plunged over fears of the coronavirus. On March 23, the stock market’s nadir this year, the U.S. Federal Reserve announced aggressive new measures to calm investors. Since then, the stock market – and particularly the stocks of Apple, Microsoft Corp., Amazon.com Inc., Alphabet Inc. and Facebook Inc. – largely soared, with the S&P 500 hitting a new high on Tuesday.
Investors have poured billions of dollars into the tech behemoths, betting that their immense size and power would serve as refuges from the pandemic-induced recession. Together, those five companies’ value has swelled by almost US$3-trillion since March 23, nearly the same growth as the S&P 500′s next 50 most valuable companies combined, including Berkshire Hathaway Inc., Walmart Inc. and Walt Disney Co., according to S&P Global, the market analytics firm. Apple’s valuation alone rose by about US$6.8-billion a day, more than the value of American Airlines Inc.
“It’s become the new flight to safety,” Aswath Damodaran, a New York University finance professor who studies the stock market, said of investors flocking to Big Tech. Companies that are rich, flexible and digital are benefiting in the pandemic – and that describes the tech Goliaths, he said, adding, “This crisis has strengthened what was already a strong hand.”
Apple’s rapid rise to US$2-trillion is particularly astonishing because the company has not done much new in the past two years. It has simply built one of the tech industry’s most effective moneymakers, which has such a firm grip over how people communicate, entertain themselves and shop that it no longer relies on groundbreaking inventions to keep the business humming.
When Apple first reached US$1-trillion in August, 2018, it came after decades of innovation. The company, founded in 1976 by Steve Jobs and Steve Wozniak, churned out world-changing products such as the Macintosh computer, the iPod, the App Store and the iPhone.
Since then, it has mostly tweaked past creations, selling gadgets with names such as the Apple Watch Series 5, the AirPods Pro and the iPhone 11 Pro Max. It has also pushed into services such as streaming music, streaming movies and TV programs and providing news, selling subscriptions for them.
Under its chief executive, Tim Cook, Apple’s most important innovation in recent years has arguably been its nearly unrivaled ability to generate profits. Mr. Cook has built a sophisticated global supply chain to produce billions of devices – most assembled in China – and leaned into a product line designed to lock customers into its ecosystem so they buy new gadgets every few years and pay monthly fees to use Apple’s suite of digital services.
Apple has also grown despite its size by extracting more money from the companies that run businesses on iPhone apps, drawing accusations that its 30-per-cent cut of some app revenues is unfair.
The Silicon Valley company’s business has been only further entrenched by the pandemic, which has forced people to work, learn and socialize virtually. From April through June, even as Apple shuttered many of its retail stores because of the virus, it posted US$11.25-billion in profits, up 12 per cent from a year age. It increased its sales of every product and in every part of the world.
“Our products and services are very relevant to our customers’ lives, and in some cases, even more during the pandemic than ever before,” Luca Maestri, Apple’s finance chief, said in an interview last month.
Still, Mr. Maestri disputed that the pandemic has been good for business. Apple would have made billions of dollars more without it, he said.
In the company’s most recent earnings call, mr. Cook said, “We do not have a zero-sum approach to prosperity.” He added, “We are focused on growing the pie, making sure our success isn’t just our success and that everything we make, build or do is geared toward creating opportunities for others.”
Apple declined further comment.
Amazon, Microsoft, Facebook and Alphabet, which owns Google and YouTube, have also continued raking in billions of dollars amid the pandemic. Their outsized influence has attracted intense scrutiny over the past year, including a bipartisan grilling of four of the companies’ chief executives in Congress last month.
Representative David Cicilline, chairman of the House subcommittee that is investigating how the tech giants are brandishing their power, warned at the hearing that the companies had grown too powerful.
“Their ability to dictate terms, call the shots, upend entire sectors and inspire fear represent the powers of a private government,” he said. “As hard as it is to believe, it is possible that our economy will emerge from this crisis even more concentrated and consolidated than before.”
Last week, Apple’s power over its App Store was in the spotlight when it booted the popular game Fortnite from its store. Epic Games, which makes Fortnite, then sued Apple in federal court, accusing the company of violating antitrust laws by forcing developers to use its payment systems.
Apple has also wielded another powerful tool to boost its valuation and enrich its investors and executives: stock buybacks. Since the company’s value hit US$1-trillion, it has returned US$175.6-billion to shareholders, including US$141-billion in stock buybacks. Apple has repurchased more than US$360-billion of its own shares since 2012, by far the most of any company, and has announced plans to spend at least tens of billions of dollars more on Apple stock.
Apple has increased its buybacks since it used the Trump administration’s 2017 tax law to bring back most of the US$252-billion it had once held abroad. (The law saved it US$43-billion in taxes on the move, according to the Institute on Taxation and Economic Policy, a research group in Washington.) Apple has US$194-billion in cash and bonds.
Buying back stock generally increases a company’s share price, in part because it reduces the total number of shares for sale. Critics have argued that it also increases inequality because it mostly enriches wealthy investors and the company’s own executives, who are often large shareholders, as is the case with Apple. Executives and some economists said that returning excess cash to shareholders is better than sitting on it.
Apple is the second publicly traded company to hit US$2-trillion. Saudi Aramco, Saudi Arabia’s state-owned oil company, went public in December and briefly exceeded the US$2-trillion mark. It remained the world’s most valuable company until Apple surpassed it last month.
Others are vying to reach the US$2-trillion mark soon. The candidates likely to hit that milestone next? Microsoft, Amazon and Alphabet.
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