Tech Takeover: A Continued Race to the Top
The technology sector is continuing to take over of the broader market with the Dow Jones being revamped & the surge of IPOs.
The technology sector is continuing with its takeover of the broader market with the recent announcement of Exxon, Raytheon, and Pfizer being removed from the Dow Jones Industrial Average Index.
ExxonMobil and Raytheon Technologies are two of the oldest members of the Dow Jones. Exxon was added in 1928, and Raytheon was added by way of a merger this year with United Technologies, which was a part of the index since the 30s when it was originally known as United Aircraft. Pfizer, one of the largest pharmaceutical companies in the world, is also being removed from the index.
Taking their place is Salesforce, Amgen, and Honeywell. Honeywell had previously been a part of the index from 1925 through 2008, returning after a hiatus of more than a decade.
However, with the addition of Salesforce and Amgen, it demonstrates the seemingly unassailable force of the tech sector. While Salesforce is the cloud-based sales automation software we all know and love, Amgen is the one of the world’s largest biotech companies. The move to add Amgen and remove Pfizer goes to show how the biotech sector seems to be outshining traditional pharmaceutical companies.
These two companies may help buoy the index when the changes go live on August 31st, considering how the Dow Jones is a share price-weighted index and that Apple’s four-for-one stock split goes into effect the same day.
Because the market environment for tech stocks has been so favorable for the past few months, many tech companies are rushing to file their IPOs to tap into those capital flows. Most recently, three Silicon Valley startups—Snowflake, Unity, and Asana—have announced that they will be going public. All of these companies are experiencing net losses, but are accelerating plans to list to try and leverage this frenetic rally.
However, Jack Ma’s company, Ant Group, is taking the cake as the company had also filed for their IPO, aiming to raise a record $30 billion for a valuation of $200-$300 billion. Selling at least 10% of its shares, Ant Group will have a dual listing in Hong Kong and Shanghai. Should Ant raise $30 billion in their IPO, they will have topped Saudi Aramco’s eye-popping $29 billion IPO last year. With their broad move into financial services in general, Ant intends to invest 40% of their IPO funds into R&D, 30% into expanding its user base and product offerings, and 10% into building its international business.
All these events point to how tech has blossomed this year and are driving market momentum—the question is, what could potentially disrupt their stride?