January 14, 2020

Alphabet Nears $1 Trillion

Alphabet Nears $1 Trillion

Alphabet Inc, the parent company of Google and the world’s fifth-largest technology company by revenue is on the verge of joining the prestigious $1 trillion club. Although it won’t be the first company to reach a market capitalisation of $1 trillion, it certainly puts the tech giant in an exclusive club.

Creation of a Tech Giant

Alphabet Inc was created in 2015 as a holding company for Google, the internet search company founded by Larry Page and Sergey Brin when both were students at Stanford in 1998. Although Alphabet also consists of other companies such as Makani Technologies LLC (an airborne wind turbine developer) and Calico LLC (a biotech company with the goal of combating ageing and associated diseases), Google still accounts for 99.6% of Alphabets revenues.

History of the $1 Trillion Club

Should Alphabet hit the $1 Trillion mark, it will become the fourth tech giant to do so following in the footsteps of Apple, Microsoft and Amazon. Whilst Apple was the first ‘Big Tech’ firm to break the prestigious barrier in August 2018, Amazon quickly and briefly followed suit five weeks later by hitting the monumental $1 trillion mark whilst Microsoft first achieved a $1 trillion market capitalisation in June 2019.

Apple may not have been the first company to be valued at over $1 trillion; however, if one is to allow for inflation, of course. To do that we need to go back five centuries and take a look at the Dutch East India Co. who thanks to garnering a monopoly on Dutch trade in Asia and the soaring prices of tulip bulbs in the 1630’s known as ‘Tulip Mania’, the company was able to reach a market valuation of 78 million Dutch guilders. That’s $8.2 trillion in today’s money. 

Not bad for selling tulips!

Oil Still King!

However, if we fast forward a few centuries to the early 1900’s we can see that oil was (and still is) king. That’s because, before the government ordered its breakup in 1911, John D. Rockefeller’s Standard Oil was America’s largest company with estimate’s putting the companies market cap at $1 trillion in today’s terms. 

Whilst this seems like a remarkable figure for 1911, it doesn’t quite compare to the $2 trillion valuation Saudi Aramco achieved on its second day of trading as a publicly-traded company in December of 2019.

Outlook for Alphabet

Whilst not the first company to hit the landmark $1 trillion valuation, it can’t be denied that reaching such a valuation is certainly a rare and amazing feat. Although shares of Alphabet have surged 7% since the start of the year amidst hopes the tech giant will report another record increase in advertising when it announces earnings on February 3rd, it can’t be denied that this surge has been clouded by calls for stronger privacy and antitrust regulation in the industry.

With all this to consider, how do you think Alphabet will perform in 2020?