By Joy Wiltermuth
Think big tech stocks are too toppy?
Lately, it has been a near daily tug of war when it comes to whether the lofty share prices of highflying technology companies can be justified, particularly as benchmark bond yields /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -0.09% rise from pandemic lows and a greater share of the U.S. population gets vaccinated against COVID-19 , spurring hope for a robust economic recovery.
The technology-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.88% closed down 0.9% Tuesday , while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.74% lost 0.7% and blue-chip Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.66% slumped 0.8%.
Shares of Apple, Inc . /zigman2/quotes/202934861/composite AAPL +0.53% , the world’s largest company when measured by market capitalization, fell 1.3%.
But as investors embrace an on-again, off-again love affair with tech stocks, it may be worthwhile to look at how much big companies, not just individuals, have been spending at tech giants like Apple, Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -0.45% , Google parent Alphabet Inc. /zigman2/quotes/205453964/composite GOOG +0.73% , Microsoft Corp. /zigman2/quotes/207732364/composite MSFT +1.09% and Salesforce.com Inc. /zigman2/quotes/200515854/composite CRM -0.71% in recent decades.
Consider this chart from Wells Fargo Investment Institute, which shows about half of all corporate capital expenditures flowed toward technology in 2020, up from only 24% in 1980.
As MarketWatch’s Philip van Doorn points out, Apple’s Services category, including cloud storage and backup, digital content and payment services, has growing rapidly to become its second-largest reported business category .
Analysts at the Wells Fargo Investment Institute pointed to the tumult sparked by the pandemic and the Federal Reserves’s quick action in slashing benchmark interest rates to near zero as partial reasons for last year’s record share of corporate cash flowing into technology.
“This allowed many firms to borrow low-cost capital and employ debt in an effort to accelerate growth,” the team wrote in a Tuesday note.
But the team also pointed to a broader shift over the past four decades in how companies do their work and stay competitive.
“We believe capital expenditures are at an inflection point, with technology spending poised to eclipse hard machinery spending for the first time in history,” the team wrote. “We remain favorable on the Information Technology sector.”