It is not just about technology; but about being adaptable
At least till 2005, GE or General Electric was a regular feature as the world’s most valuable company in terms of market cap. In 2006 and 2007, it just lost out the top slot to Exxon Corp due to a surge in global crude prices to $120/bbl. Then, the global financial crisis struck and GE Financials was left holding a huge mountain of dud loans. Today, GE has a market cap of $116 billion and does not figure in top-100.
A lot changed since GE
In a way, GE was the turning point in the valuation game. In the last 10 years, and especially the last 5 years, the shift to technology has been incredibly sharp. Today if you look at the top 20 most valuable companies in the market cap list, they would be somehow related to the leveraging of technology. There are the pure software and media plays like Microsoft, Facebook, Google, Tencent that are an important part of this list. Then there are the digital enablers like Amazon, Alibaba and Apple in the big list. Thirdly, you have the digital support systems like chip and semiconductors manufacturers like TSMC of Taiwan, Nvidia and Samsung that figure in the top-20 list. Finally, there are the digital payment system plays like Visa, PayPal, Mastercard which also figure in the top- notch value list. Of course, there is the odd investor like Berkshire, the odd oil company like Aramco and a fashion house like LVHM. But, these are just the exceptions that prove the digital rule.
Some big changes in rankings
If you look at the rankings over the last 25 years, there have been big shifts. In 1997, there were 6 US companies, 2 European and 2 Japanese companies in the top-10 list. In 2021, in the top-20 list, there is just 1 European company and not a single Japanese company. It has 13 US companies, 3 Chinese outfits and 1 each from Taiwan, South Korea and Saudi Arabia. In terms of industry mix, technology still tops the list but you also have digital enablers, healthcare and luxury goods makers. Oil may have been relegated due to lower crude price but then banking is one sector that has been a huge fall in rankings after the global financial crisis of year 2008.
It is actually about adaptation
If you look at the top-20 rankings, it is a list of companies highly adaptable in the most Darwinian terms. In the process, these companies reinvented the entire industry. It is all about what Apple did to media or what Amazon did to selling and cloud or what Tesla has done to the automobile sector. It is how companies made themselves indispensable like TSMC, Facebook, Google, Samsung, Visa etc. It is actually a complex chain. The companies reinventing the industry they operate in are the most adaptable. In the process, they make their very presence indispensable. That is the big story of the global value list. It needs to be seen how long this list survives!