A short primer on top American stocks: Tech

Finally, the time has come to deal with what you’ve been waiting for all along - the U.S. tech industry. When it comes to information technology, no other country in the world can even hold a candle to the U.S.A. Such is the level of innovation and technology in the country. From semiconductors and software to tech hardware and IT services, the country’s IT sector is widely considered to be the cream of the crop. 

Now, without any further ado, let’s jump right in and take a look at the tech industry and the top American stocks in this space. 

An overview of the U.S. tech sector

Among all the major sectors in the American stock market, the IT sector sits comfortably at the second spot in terms of market capitalization. With around $13.75 Trillion in market cap, it is one of the top sectors in the American economy. Research reveals that the U.S. tech sector accounts for around 12% of the country’s total GDP and is responsible for providing more than 18 million jobs in the U.S. alone. 

With so many positives in the sector, it's no wonder that investors are continuing to flock towards it. Since technology is something that is constantly evolving and would continue to consistently evolve further, there’s virtually no end to the level of innovations possible in this sector. The future growth potential of the tech industry is immense, making it the perfect option for investors looking to create wealth.   

Top American tech stocks to watch out for

Now that you’ve gotten an overview of the U.S. tech sector, let’s take a quick look at the various top American tech stocks that you should consider having in your portfolio. Some of the top stocks in this sector include Facebook, Apple, Amazon, Netflix, Alphabet (earlier listed as Google) and Microsoft. Of these, the first five are often referred to by the finance acronym FAANG.

1. Apple

No list of the top American tech stocks would be complete without the inclusion of Apple Inc. Ever since the introduction of the first ever iPhone in the year 2007, the stock of Apple has rallied massively from around $4 to around $125. Although the company does provide a few software services such as Apple Music, it is widely considered to be a hardware manufacturer. Apple’s product portfolio is limited, but hugely popular throughout the world. And with the tech giant continuing to update its products each year and striving hard to release new ones regularly, it shows good future growth potential.   

2. Facebook

Facebook is arguably the most popular social networking site in the world. Launched around 17 years ago, Facebook now has more than 2.8 billion active users on its platform. In a bid to consolidate its position in the social media space, it went on an acquisition spree and even lapped up both Instagram and WhatsApp, two of the other hugely popular social media service providers. 

Facebook’s primary revenue generator is the blanket of advertisements it supports. It places various ads as snippets and sponsored posts throughout its user interface and in turn, receives revenue from advertisers for the same. Facebook was publicly listed in the year 2012, making it one of the very few tech companies to have listed its shares recently. Since its listing at around $38 per share, the company’s share price has grown tremendously to around $260.     

3. Amazon

Starting off its operations in the then nascent e-commerce business, Amazon quickly grew in size to become the world’s largest e-commerce giant. Slowly but steadily, the company diversified its business and focused on other IT aspects such as cloud computing, digital streaming, and artificial intelligence (AI). Today, it’s become a household name, isn’t it? If you need something but don’t want to go through the hassle of shopping for it physically, Amazon’s right there to come to your rescue.

Amazon Web Services (AWS), the company’s cloud computing division, is one of the biggest in the world right now. Whereas Amazon Prime Video, Amazon’s digital streaming division, has been seeing exceptional growth and success of late. Since its foray into the Indian market in the year 2012, Amazon has grown significantly as a tech company with its shares currently trading at around $3,000 from just around $200 in 2012.     

4. Netflix

With weekends likely dedicated to ‘Netflix and Chill, surely, you’re no stranger to Netflix. Netflix is arguably the world’s largest digital streaming content platform with a worldwide presence. The company single handedly revolutionized the way content has been consumed by the public. In addition to hosting shows, movies, and documentaries from third-party productions, the company has also recently started to produce its own content under the ‘Netflix Original’ banner. 

Thanks to more than 203 million paid subscribers, the company rakes in around $25 billion in revenue. With access to cheap internet and internet penetration set to widen even further at a faster pace throughout the world, the potential for growth is extremely high for Netflix.    

5. Microsoft

If Apple is predominantly a hardware manufacturer, then Microsoft is a pioneer in top-notch software services through and through. Although it dabbled a bit in the hardware division, it didn’t see much success there, unlike its rival. But then, when it comes to software, Microsoft Corp. is still the king. Its flagship software - Microsoft Windows, an operating system for PCs and other devices, is the most widely used in the world. 

In addition to that, the company also has an extremely powerful productivity suite - Microsoft Office. Individuals, businesses, and other corporations rely on Microsoft’s software services every day to carry out their daily operations. The software service portfolio of the company is quite extensive and diversified. It even includes a dedicated gaming division under the name ‘Xbox,’ one that you’re no doubt familiar with.

6. Alphabet

Listed earlier as ‘Google’, Alphabet is the parent holding company of the world’s No. 1 search engine - Google. The company ‘Alphabet’ was created by Google in a bid to consolidate all of its subsidiaries under one single entity to make management and administration easier. Although Alphabet is essentially a basket containing multiple other ones, Google is by far its biggest contributor in terms of revenue. 

Being the world’s most preferred search engine, Google’s primary business model is to earn through advertising revenue. In addition to ad revenue, Google is also involved in the cloud computing, software, and hardware spaces as well. Its software services portfolio is by far the most extensive and easily dwarfs other tech giants like Amazon, Apple, and Microsoft combined. This makes Google, and by extension, Alphabet, one of the most valuable companies in the entire world.  

Wrapping up

With this, we’ll wrap up our primer on top American tech stocks. The six companies that we’ve talked about here are the best of the best. However, this list is by no means exhaustive. There are plenty of other great tech stocks out there such as Advanced Micro Devices (AMD), Intel Corp., and Nvidia, among others. You could also check them out, if you’re interested in investing in those stocks. In the next chapter, we’ll delve into some of the top non-tech companies that are listed in the American stock market.    

A quick recap

• Among all the major sectors in the American stock market, the IT sector sits comfortably at one of the top spots in terms of market capitalization.
• The future growth potential of the tech industry is immense, making it the perfect option for investors looking to create wealth.   
• Some of the top stocks in this sector include Facebook, Apple, Amazon, Netflix, Alphabet (earlier listed as Google) and Microsoft. Of these, the first five are often referred to by the finance acronym FAANG.