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What Are the GAFAM Stocks?

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by Beatrice Mastropietro · 7 min read
What Are the GAFAM Stocks?
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This guide will give you a brief overview of the GAFAM stocks and provide some background on what they are. This is a great starting point for investors who want to learn about these companies before investing in them.

GAFAM stocks is an acronym referring to the technology giants: Google LLC (NYSE: GOOGL), Apple Inc (NYSE: AAPL), Facebook Inc (NYSE: FB), Amazon.com Inc (NYSE: AMZN), and Microsoft Corporation (NYSE: MSFT). GAFAM was a term used for years in the financial sector by insiders and analysts when attempting to gauge the performance of these five companies against one another. The acronym resulted from their growing presence in the information technology sector. GAFAM group has been extremely successful since its inception. However, they also have different business models and structures, making it difficult to compare them using conventional methods.

GAFAM benchmarking is gaining popularity amongst portfolio managers as well as hedge fund managers because it eliminates many risks associated with investing based on company-specific news stories or macroeconomic factors outside the control of both.

How to Invest in GAFAM Stocks

Investors seeking exposure to GAFAM stocks can consider GAFAM ETFs, GAFAM mutual funds, and GAFAM index funds. GAFAM ETFs track an index of GAFAM Stocks. GAFAM mutual funds and GAFAM index funds are actively managed, so their portfolios will differ from the GAFAM stock indexes that they aim to track. Other options include investing in individual GAFAM stocks directly or through exchange-traded notes (ETNs). Investors who want to invest in more than one GAFAM company can create a basket of stocks by buying a fund that invests in all five companies.

Google

Google is a web search engine that allows people to use its technology to find information on the Internet. Serving more than 1 billion unique users per month and indexing billions of web pages, Google remains one of the most important sources of data on the world wide web. Its co-founders Larry Page and Sergey Brin initially coined its name as “googol” (which means one followed by 100 zeros) that has become synonymous with incredible amounts of digital information.

Google is one of the most dominating search engines in the world, and it’s not difficult to see why.  With a market share of over 90%, Google generates its revenue on advertisements posted on its site. It also makes money from sponsored links that appear alongside normal results. Google has also invested heavily in future technologies like driverless cars and virtual reality. And this could be where Google will get its income from in coming years.

Google’s performance in the stock exchange has been excellent over the past two decades, as it has grown to be worth over $600 billion as of August 2021.

Apple

Apple Inc. is one of the largest technology companies in the world with a variety of products, including laptops, iPhones, iPods, and iPads.

The company was officially incorporated on January 3, 1977, by Steve Jobs, Steve Wozniak, and Ronald Wayne. Its first product was the Apple I motherboard in 1985. For more than three decades, Apple Computer was predominantly a manufacturer of personal computers, including the Apple II, Macintosh, and Power Mac lines. However, it faced rocky sales and low market share during the 1990s.

As of 2021, Apple is one of the top tech companies in the world. It sells its products worldwide through its retail stores, online stores, direct sales force and third-party cellular network carriers, wholesalers, retailers, and value-added resellers to the consumer and also sells third-party iPhone, iPad, Mac, and iPod compatible products, including application software and accessories through its online and retail stores.

Facebook

With increasing social networks in the past few years, Facebook Inc. has grown tremendously. It allows people to connect or form groups based on their interests. People use it through personal computers, mobile phones, and even handsets these days.

Facebook holds a significant audience to target with advertisements, which have taken over from traditional modes. Its large user base and sizable viewership provide ample opportunities for business on the platform.

Facebook’s stock price has been climbing drastically over the last couple of years, with its market capitalization increasing significantly during that time. The company reported a Market Capitalization of $985.92 billion for its second fiscal quarter in 2021. The uptrend is expected to continue. Facebook stocks are in the surge as of August 2021, making it a good asset to invest in as there is a likelihood of the investor gaining significant profits through this investment.

Amazon

Amazon appeared as a web-based quality assurance tool in 1994. The company now serves consumers, sellers, developers, enterprises such as the content creators of movies and books. Amazon provides advertising services for publishers of products like phone chargers, books, etc.

The Amazon Prime membership provides customers with various benefits, ranging from lower prices to own goods. Amazon web services offer on-demand data storage and software as a service.

The company supplies products and digitized items globally through sale channels such as RTGS (real-time gross settlement), the FTSE Commodities Exchange, other financial institutions’ foreign currency exchange dealing rooms, securities companies, its personal computer and video game stores, Zappos.com, vendors, or their authorized distributors where particular music is sold in than CD form only.

Microsoft

Microsoft Corporation is an American multinational technology company headquartered in Redmond, Washington. It develops and produces a wide range of products, including computer software, video games, internet search engines Bing, smartphones Surface PC.

Microsoft’s platforms and tools benefit many businesses in fast-growing industries such as artificial intelligence, education technology, and cybersecurity. Microsoft also helps customers drive competitiveness with tools for productivity, business analytics, and the intelligent edge.

The company is now at the point where it will introduce new computing innovations. Microsoft offers cloud-based solutions, services, software, platforms, and content in addition to its legacy operating system. The company also provides server applications and desktop management tools. They also provide software development tools.

Microsoft is involved in various businesses. It develops and manufactures personal computers, gaming consoles, tablets, phones, and related accessories.

In 2020, it recorded revenue of $143 billion. Besides, it generated a profit of operating income of $53 billion and net income of $44.3 billion that year.

What Is the Difference between FAANG and GAFAM Stocks?

When comparing the terms GAFAM and FAANG, Netflix Inc (NYSE: NFLX) is swapped with Microsoft in the GAFAM. Only four of the firms in FAANG are in the technology industry. Meanwhile, Netflix is an entertainment corporation that provides clients with a wide variety of programs, web series, and movies. It is a wholly different industry from IT and is mainly associated with media. If you haven’t noticed, the acronym GAFAM includes all of those firms that were previously in FAANG (the exception being Netflix).

You might be wondering why Amazon is included in the list, considering that it happens to be a consumer services company. Amazon does provide cloud-hosting for companies, so they contribute to the technology sector with this in mind. For instance, AWS (Amazon Web Services) provides a hosting service that allows online publishing tools and website providers.

GAFAM Stocks in the COVID-19 Pandemic

The coronavirus pandemic not only caused many deaths but also provoked the decline of the world’s economy. Many businesses also recorded massive losses as a result of the deadly disease.

However, things are different for the tech giants (GAFAM). As the pandemic worsened, people started to work from home. People were forced to employ technology for this to happen. In particular, people used Google services to attend interviews and also when there was a need to communicate with customers. People also opted to buy goods through online platforms like Amazon. At the same time, many idle people flooded social media platforms like  Facebook. All this increased the revenue of the tech companies.

Conclusion

Stocks of companies like Google, Apple, Facebook, Amazon, and Microsoft (GAFAM) have been growing with significant values. Market analysts believe that the digital world would not be possible without these high-priced tech giants. Each company has a market value that ranges from $500 billion to around $1, as of 2021.

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FAQ

What are the GAFAM stocks?

GAFAM is an acronym for the five US-based tech stocks Google (Alphabet), Apple, Facebook, Amazon, and Microsoft.

What is the difference between GAFAM and FAANG?

FAANG includes many of the same stocks as GAFAM but replaces Microsoft with Netflix.

How did GAFAM stocks perform during the COVID-19 pandemic?

As the pandemic worsened, people started to work from home. People were forced to employ technology for this to happen. In particular, people used Google services to attend interviews and also when there was a need to communicate with customers. People also opted to buy goods through online platforms like Amazon. At the same time, many idle people flooded social media platforms like  Facebook. All this increased the revenue of the tech companies.

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