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When COVID-19 began to spread publicly in the U.S., predictions were grim and quickly ended a bull market in technology that had lasted more than a decade.
One hundred days after the World Health Organization declared the coronavirus a worldwide pandemic, tech stocks have bounced back along with companies’ supply chains and executives’ bright outlooks. Silicon Valley leaders — cautious to make dramatic pronouncements in the opening weeks — now say their long-predicted remaking of the U.S. corporate machine into a cloud-enabled, work-from-anywhere workforce with constant access to intelligent tools has only been accelerated by the response to the disease.
Read: Here are the best and worst stocks during the first 100 days of the coronavirus pandemic
Data show a more nuanced shift in U.S. tech behavior, one that does benefit newer technologies that seem to be tailor-made for a population trapped at home with an internet connection: Endless streaming media, instant video chats with friends anywhere in the world, constant connections to coworkers. While consumer adoption of those technologies, and a larger enterprise shift toward cloud computing and software, is likely to be long-lasting, demand for other tech products — especially hardware — is an open question.
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In the first quarter, sales in the information-technology sector of the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.30% index rose 4.3%, less than the expected 6.7% but stronger than a slight contraction in the first quarter of 2019. The first quarter comprised only the first three weeks of the pandemic, so second-quarter numbers will be more telling — analysts are currently modeling a decline of less than 1%, third-best of the S&P’s 11 segments.
The IT sector has the two most valuable tech companies in the U.S., Apple Inc. /zigman2/quotes/202934861/composite AAPL -0.44% and Microsoft Corp. /zigman2/quotes/207732364/composite MSFT +0.34% , but it would likely be expected to grow if it still included Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +0.54% , Facebook Inc. /zigman2/quotes/205064656/composite FB -0.75% and Netflix Inc. /zigman2/quotes/202353025/composite NFLX -0.80% Amazon alone is expected to grow sales more than 27% in the second quarter, as e-commerce deliveries and cloud computing power experience large demand spikes.
With workers returning to offices and stores reopening across the U.S., it is hard to predict how tech’s lessons from the past 100 days will relate to coming days, but they do show investors what some companies stand to gain and lose.
Big Tech appears to be just fine
Apple, Microsoft, Amazon, Alphabet Inc. /zigman2/quotes/202490156/composite GOOGL -0.04% /zigman2/quotes/205453964/composite GOOG +0.08% and Facebook were worth a combined $4.8 trillion at the end of trading March 10, the day before WHO’s declared an official pandemic. On Wednesday, they closed at a combined valuation of roughly $6 trillion.
That extra $1 trillion-plus is the confidence investors have put into the continued resilience of the five Big Tech companies, which have established businesses in hot areas along with vast resources and customers and may only be rivaled by each other. Amazon dominates cloud computing, but faces growing threats from Microsoft and Google; Facebook and Google command much of the online-advertising market, but Amazon is a growing force there; Facebook and Google both want to establish videoconferencing beachheads to rival Apple’s FaceTime.
See also: MarketWatch’s coronavirus recovery tracker
Amazon and Microsoft especially seem secure, although Amazon will spend its operating profit in an attempt to bolster its operations. Google and Facebook’s reliance on a shaky market for online advertisements could be worrisome, but Google has YouTube and the growing cloud business to soften the blow while Facebook’s rivals will certainly weather rougher storms than the social-media juggernaut.
That leaves Apple. Consumers aren’t as likely to make big device purchases given financial uncertainty and temporary retail store closures, and that could continue to weigh on the iPhone maker’s business. The company saw a 6% drop in iPhone sales last quarter, and analysts expect a 16% drop in the current period. While the smartphone giant eked out positive overall revenue growth for the March quarter, sales are expected to turn negative this time around.