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Supremacy of GAFAM companies under threat

With over 2 billion active monthly users, Facebook is used by more than one in four people on the planet. As for Apple, with its $130 billion in cash reserves, the firm could easily buy out a company such as LVMH, the highest ranked by market capitalisation on the CAC 40.

While the technology heavyweights still reign supreme over the global economy, dark clouds began to loom during 2018. Could the golden era of Google, Amazon, Facebook, Apple and Microsoft (GAFAM) be coming to an end?

A troubling end to the year on the stock market

Last August, Apple became the first ever listed company to cross the $1 trillion market cap threshold. Just four months later, the company's stock had tumbled by over 30%, dropping back to less than $700 billion. Having claimed the market cap crown in the summer, Apple was then knocked off the top spot by Microsoft ($765 billion), Amazon ($747 billion) and Alphabet (Google's parent company valued at $730 billion).

Example 1 - Opening Trade
A £12,000 unit trade on UK Company ABC at a price of 100p would incur a commission charge of £12 to enter the trade:
12,000 (units) x 100p (entry price) = £12,000 x 0.10% 12.00 

Slowing Chinese economic growth is taking its toll on iPhone sales, but Apple, much like the other GAFAM members, must also start to face the rising competition posed by the Chinese BATX companies (Baidu, Alibaba, Tencent and Xiaomi).

For US tech index NASDAQ, the second quarter looks to have been particularly gloomy for its GAFAM members, opening more than 20% down.

Data management

Aside from their cash reserves, the GAFAM companies are sitting on another gold mine: data. Artificial intelligence depends on it, and its algorithms feed off it. Personal and public data form the cornerstone of the tech giants’ business strategies.

With billions of users and unimaginable wealth, these companies have gradually broadened their activities far beyond their original core businesses. However, as the saying goes, with great power comes great responsibility. This is the flipside for the GAFAM companies’ success: how can they manage and protect their users' personal data without seeing their returns wane?

Given the extremely personal nature of the data it exploits, and after the Cambridge Analytica scandal at the start of last year, Facebook, more so than the other GAFAM companies, has discovered its Achilles heel.

Could 2019 mark the end of tax evasion?

On 1 January 2019, France introduced the GAFAM tax on sales revenue, which, according to France's finance minister, Bruno Le Maire, could see the tech giants paying €500 million for their activities in France alone. This tax measure has been a long time coming and aims to reduce the difference in tax rates between the behemoths of the Web, who have mostly paid tax on 9% or less of their sales revenue, while the more traditional businesses are for the most part liable for up to 23%.

A project is underway to roll out the GAFAM tax throughout the European Union. Both France and the European finance commissioner support the project, which should be finalised in the next few months.


CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

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