U.S. tech giants added $2.4 trillion to their market capitalizations in a year defined by the hype around generative artificial intelligence, according to a new report from venture capital firm Accel.
Accel, in its annual Euroscape report, said the share price values of big technology firms such as Apple, Microsoft, Alphabet, Amazon and Nvidia rose by an average of 36% year over year.
Nvidia joined the trillion-dollar club for the first time, with the U.S. chip giant now worth over $1 trillion. Nvidia’s high-performance chips power many advanced generative AI models, which produce new content from huge volumes of training data.
The world’s biggest technology companies added $2.4 trillion to their market capitalizations in 2023, according to Accel data.
Accel
Accel’s Euroscape index, which includes massive cloud and software-as-a-service (SaaS) names such as Salesforce, Palantir and Unity, rose 29% in the year to date.
The Euroscape index, which tracks several publicly-listed cloud stocks, is up 29% year-to-date, according to Accel.
Accel
Last year, the picture for cloud and SaaS was grim. Companies saw $1.6 trillion wiped off their value as investors rotated out of high-growth tech stocks, according to Accel. Now, there are signs the pressure is easing.
Faster recovery than after dotcom bust
The tech-heavy Nasdaq Composite returned to 80% of its all-time high within 18 months, according to Accel, marking a faster bounce back than than after the dotcom bust in the 1990s.
The Nasdaq recovered 80% of its all-time high within 18 months.
Accel
It took the Nasdaq around 14 years to reach that milestone, Accel said.
It took the Nasdaq Composite 14 years to recover 80% of its 2000 peak.
Accel
Public multiples for Euroscape companies are also back to a 10-year pre-Covid average of 6.1-times next-twelve-months revenue. Funding for cloud and SaaS companies in Europe, Israel and the U.S. has also reverted to pre-Covid levels.
Public SaaS and cloud company multiples have reverted back to their 10-year, pre-Covid average, according to Accel.
Accel
“We are in a very different time than 2000,” Botteri told CNBC.
“If you look back at 2000, it really took a long time … for the Nasdaq to get back to 80% of its peak. And now, after the 2021 reset, it only took 18 months to get there.”
The year of AI
AI was the primary technology driving the performance of cloud and SaaS in 2023, according to Accel — and it’s not difficult to see why.
The world has been abuzz with talk about generative AI tools like OpenAI’s ChatGPT, Google’s Bard and Anthropic’s Claude.
“Generative AI is something that is really redefining software,” Philippe Botteri, partner at Accel, told CNBC on a call Friday.
“Any software company is leveraging generative AI, whether they’re just a startup or a new company or an existing company … You should really think about this as something that is pervasive.”
The U.S. led the way in generative AI funding deals, with the likes of OpenAI and Anthropic raising billions. OpenAI raised the biggest sum — $10 billion — and Inflection came second with $1.3 billion raised.
The number of new unicorns created in 2023 has reverted back to pre-Covid levels — however, AI is a bright spot with a majority of the unicorns now generative AI companies.
Accel
In Europe, three of the biggest generative AI company rounds came out of France — Hugging Face ($235 million), Poolside ($126 million) and Mistral AI ($113 million).
The number of unicorn companies reverted to pre-Covid levels, with AI taking up a much greater proportion of new billion-dollar companies. In Europe and Israel, 40% of new unicorns were in generative AI; in the United States, it was 80%.
Shifting focus to profitability
This year has been a tough one for tech, with fundraising and valuations dropping sharply as investors grew wary of the sector.
Tech companies tend to prioritize growth and expansion over short-term profits. But investors have been shifting money away from high-growth bets amid higher interest rates, which make the cost of capital more expensive.
Accordingly, the growth rates of Euroscape companies fell from an average of 68% in the first quarter of 2021 to 23% in the second quarter of 2023.
Free cash flow increased on average from -9% to +5% in the same period.
Big Tech takes a beating
This year, deal-making activity from tech giants hit a snag as regulators clamped down on those firms over concerns that they’d become too large.
There were only 10 transactions involving a Big Tech company this year, Accel noted. That’s down sharply from prior years. In 2021, acquisitions led by FAANG (Facebook, Amazon, Apple, Netflix and Google) hit 27, and in 2022 there were 26 Big Tech deals.
The number of Big Tech-led acquisitions declined sharply in 2023 — down from 26 last year.
Accel
One deal that faced a lot of pressure from regulators was Microsoft’s blockbuster bid to acquire Activision Blizzard, the massive video game studio behind hit titles “Call of Duty,” “Candy Crush” and “Crash Bandicoot.”
The two companies finally sealed the deal last week after British regulators gave their blessing. But that was only after a protracted fight between the two parties.
But the first full trading week of the month saw stocks caught in November rains.
The S&P 500 and Dow Jones Industrial Average each lost more than 1%, while the Nasdaq Composite shed around 3% — that’s its largest weekly loss since the tech-heavy index slumped 10% in the week ended April 4.
A few months ago, tariffs were the shadows that stalked stocks. Now, it’s fears that artificial intelligence-related stocks are trading at prices disconnected from what the firms are actually worth.
“You’ve got trillions of dollars tied up in seven stocks, for example. So, it’s inevitable, with that kind of concentration, that there will be a worry about, ‘You know, when will this bubble burst?‘” CEO of DBS, Southeast Asia’s largest bank,Tan Su Shan told CNBC.
“It’s likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months,” Solomon said Tuesday at the Global Financial Leaders’ Investment Summit in Hong Kong.
That said, a pullback isn’t necessarily bad for stocks. It could even present “buying opportunities” for investors, according to Glen Smith, chief investment officer at GDS Wealth Management.
After all, earnings have been “reassuring” despite worries about tech stocks’ high valuations, Kiran Ganesh, multi-asset strategist at UBS, told CNBC. That means the rain might not last and the rally could find a way to run a little longer.
— CNBC’s Lee Ying Shan, Hugh Leask and Lim Hui Jie contributed to this report.
China rolls back curbs on rare earths. Beijing said Friday that it would suspend some restrictions on exports of rare earth elements. The move follows talks between U.S. President Donald Trump and his Chinese counterpart Xi Jinping on Oct. 30.
Nexperia impasse shows signs of easing. The Chinese Commerce Ministry said in a statement Sunday that it had taken steps to allow exports of certain chips from Nexperia’s China facility. Shares of Nexperia parent Wingtech Technology climbed Monday.
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China has rolled back a number of restrictions on its export of critical minerals and rare earth materials to the United States, in a sign that a trade truce between the world’s two largest economies is holding.
China’s Ministry of Commerce said Friday that it would suspend some export controls on critical minerals used in military hardware, semiconductors and other high-tech industries for a year.
The suspended restrictions, first imposed on Oct. 9, include limits on the export of certain rare earth elements, lithium battery materials, and processing technologies.
The export relaxations follow talks between U.S. President Donald Trump and Chinese President Xi Jinping in Busan, South Korea, on Oct. 30.
Beijing also reversed retaliatory curbs on exports of gallium, germanium, antimony and other so-called super-hard materials such as synthetic diamonds and boron nitrides. Those measures, introduced in December 2024, were widely seen as retaliation for Washington’s expanded semiconductor export restrictions on China.
China classifies such materials as “dual-use items,” meaning they can be used for both civilian and military purposes.
Beyond military applications, these critical minerals are used across the semiconductor industry and other high-tech sectors — sectors at the heart of U.S.-China trade tensions.
Beijing has also suspended the stricter end-user and end-use verification checks for exports of dual-use graphite to the U.S., which were imposed in December 2024 alongside the broader export ban.
China dominates global production of most critical minerals and rare earth elements and has increasingly used its export policies as leverage in trade disputes.
As part of the latest China-U.S. trade deal, the U.S. has agreed to several concessions, including lowering tariffs on Chinese imports by 10 percentage points, and suspending Trump’s heightened “reciprocal tariffs” on Chinese imports until Nov. 10, 2026.
The U.S. will also postpone a rule announced Sept. 29 that would have blacklisted majority-owned subsidiaries of Chinese companies on its entity list.
But the first full trading week of the month saw stocks caught in November rains.
The S&P 500 and Dow Jones Industrial Average each lost more than 1%, while the Nasdaq Composite shed around 3% — that’s its largest weekly loss since the tech-heavy index slumped 10% in the week ended April 4.
A few months ago, tariffs were the shadows that stalked stocks. Now, it’s fears that artificial intelligence-related stocks are trading at prices disconnected from what the firms are actually worth.
“You’ve got trillions of dollars tied up in seven stocks, for example. So, it’s inevitable, with that kind of concentration, that there will be a worry about, ‘You know, when will this bubble burst?‘” CEO of DBS, Southeast Asia’s largest bank,Tan Su Shan told CNBC.
“It’s likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months,” Solomon said Tuesday at the Global Financial Leaders’ Investment Summit in Hong Kong.
That said, a pullback isn’t necessarily bad for stocks. It could even present “buying opportunities” for investors, according to Glen Smith, chief investment officer at GDS Wealth Management.
After all, earnings have been “reassuring” despite worries about tech stocks’ high valuations, Kiran Ganesh, multi-asset strategist at UBS, told CNBC. That means the rain might not last and the rally could find a way to run a little longer.
— CNBC’s Lee Ying Shan, Hugh Leask and Lim Hui Jie contributed to this report.
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[PRO] Stocks that could bounce after sell-off. Using CNBC Pro’s stock screener tool, we found several names that are oversold, according to their 14-day relative strength index. This implies they could be due for a recovery in prices.
Fundraisers and fraudsters are presenting themselves as family office representatives, seeking to dupe gullible investors — and then there are also imposters who are in it just for an “ego boost,” several industry veterans told CNBC.
An information vacuum seems to have encouraged imposters. In many markets, genuine single family offices, or SFOs, are exempt from registering so long as they manage only family money. That privacy norm often makes verification hard, said industry experts.
