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For most people, 2020's been a pretty awful year. Over 1.7 million people have died from COVID-19, countless small businesses have been destroyed by lockdowns and we've all gotten much too familiar with our living rooms. But for anyone who owns tech stocks, 2020's at least had a silver lining.
As work, education and retail went virtual, tech stocks of all kinds boomed. Big Tech did particularly well. Take Amazon, which rebounded from March lows to end the year up 74%. And while some commentators thought the economic impact of the virus would hurt a luxury brand like Apple, its shares are up 80%. The wider market, meanwhile, is up just 14%.
Having outperformed the market so significantly, Big Tech has now cemented its hold over the S&P 500. America's five biggest companies — Apple, Microsoft, Amazon, Alphabet and Facebook — now account for almost 20% of the 500-company index. Apple's share alone has increased from 4.6% at the start of the year to 6.8% today.
It's not just Big Tech doing well, either. Over the past decade, the information technology and communication services sectors have steadily grown in size, a trend that only continued this year with the two now making up almost 40% of the S&P 500.
Two stocks stood out above all else. Zoom, rapidly pivoting from a workplace tool to a platform for … basically everything, grew revenues at an astonishing pace. Its stock price followed, ending the year up more than 500%. But even Zoom couldn't compete with the stock market's erstwhile darling, Tesla. The electric car pioneer's stock soared almost 700%, with last week's S&P 500 addition capping off Elon Musk's remarkable year.
Some sectors did particularly well amid the pandemic. The shift to remote work gave cloud providers a major boost, buoying the cloud stocks represented in the SKYY ETF. All those data centers found themselves in need of new hardware to deal with the extra demand, helping the semiconductor companies in the SOXX ETF. And once on the cloud, end-users had a whole new bucket of threats to think about: something the cybersecurity providers in the HACK ETF were eager to help tackle.
Going into 2021, the question is whether tech can maintain this outperformance. There's reason to think the good times won't last: As vaccines are rolled out and the world returns to something approaching normality, investors may rotate out of their "stay-at-home" trades in favor of the energy and travel companies that are expected to bounce back.
That could have significant consequences: Given tech's grip on the market, any collapse in tech stocks could affect the entire economy. It's Big Tech's world, in other words — we're just living in it.