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Big tech's fearful grip on the market


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Big tech's fearful grip on the market

Opinions expressed in this piece are solely those of the author and do not represent the views of S&P Global Market Intelligence.

Big tech stocks are leading this bull market. So why am I seeing so many negative headlines in financial and general news feeds that highlight how much investors and everyday people have come to fear big tech?

Currently, the five largest market caps globally are all in the tech sector — that’s a first plus all five also have a healthy dose of media and entertainment in their business models. Here's a selected snapshot of the largest market caps every five years or so since 1996.

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There has been one tech company — and I am including telecom in that definition — in the big five market caps in every year of my summary table. But usually there are more oil and gas companies among the big five, plus one bank in the mix. But not this year.

Most big funds have strong guidelines on sector weightings or even penalties for managers who overweight their positions for long periods. Just as surging big tech stocks have helped tech weighted funds to outperform, a reversal of fortune for just one big tech name would also have a profound impact on performance, and on outflows, as noted in a recent Reuters article.

There seems in fact to be a general newfound disenchantment with big tech. Silicon Valley's storied celebration of young innovative swashbucklers creating outsize wealth by disrupting the establishment has lately turned into a slew of darker stories of would-be tech wizards awash in swash.

It's not just about failed multibillion dollar startups for $700 juicers and DNA blood testing. We are also seeing too many seedy headlines about sexism and sexual harassment, plus hateful content occupying the same platforms we embrace for social media and entertainment. And we are still struggling with stutter step transparency by platform host Facebook Inc. to find out the depth of Russian intervention in our 2016 elections.

Beyond Silicon Valley's newly surfaced tarnish, big tech's ongoing foray into mainstream entertainment may come with a few ghosts that also haunted traditional media. There's a long held and perhaps disputed narrative that decades of consolidation have allowed a half dozen companies to control 90% of American media. Critics of media consolidation say that multiple holdings of a few big media players have created "the illusion of choice." While one camp contends that the presence of big tech will help to break the hold of big media, others contend that we are simply trading one set of monopolists for another.

It's an ongoing and, I think, healthy debate about innovation versus concentration, but I don't think tech giants will be able to avoid the regulatory scrutiny that tends to come with scale. A recent article in the San Francisco Chronicle reminds us that we have a long American tradition of fearing just about any large force, which impacts our economy, work force, privacy and social fabric. Government, railroads, oil barons, airlines and big banks all come to mind.

A study once revealed that technology was the second-highest ranked "domain of fear" among a study sample of 1,541 adults, only behind top-ranked manmade disasters.

Further, corporate tracking of personal data, identity theft, robots, artificial intelligence and "tech I don't understand" all scored higher than dying, and some scored higher than natural disasters. The results seem to highlight our innate suspicions about technology.

As Halloween is approaching, it is also worth noting that every specific tech threat was ranked much higher than fears of ghosts, zombies and clowns.