Largest companies in the world

The valuation of the world’s largest companies fluctuates from day to day, even minute to minute, but true success is a marathon, not a sprint.

You’ve heard the news: Propelled by the AI ​​frenzy, chipmaker Nvidia passed the $3 trillion market cap mark and became the most valuable company in the world by market cap for a few days — last June, that is. Since then, things have more or less returned to what they used to be: as of September 3, 2024, when the market closed, Apple was still the king of the stock markets, followed closely by Microsoft. That was also the day that Nvidia, amid a stock sell-off, lost $279 billion in market value, the largest sell-off in US history (while still managing to hold on to third place).

On the other hand, Apple’s dominance should not be taken for granted. After all, over the years it has lost the title of the world’s largest many times – more often, and very recently, to Microsoft, but also to Amazon, Google and even the Saudi state oil giant Aramco. Market capitalization can change quickly, and in recent years the rankings of the world’s largest companies have seen some significant shifts.

The way these companies get to the top, and how they stay there, has also changed. For years, Apple has often seen its market capitalization fall victim to its sales success. While the popularity of products like the iPhone, Mac and iPads propelled Apple to new heights, its market cap suffered every time sales seemed to slow.

In contrast, Microsoft has built itself into one of the largest companies in the world, with a focus on steady recurring revenue streams. You may not need a new smartphone or laptop every year, but a software license, cloud computing package or video game subscription means ongoing payments and customer loyalty.

Then Apple started borrowing from Microsoft’s playbook: It launched subscriptions to news and games, a video streaming service and even its own credit card. When Apple transitioned from hardware to software and services, revenue growth became unstoppable. On January 3, 2022, Apple became the first company ever to surpass $3 trillion in market value, and it remains the largest in the world.

Market capitalization leaders change with the times

Today, most of the top ten companies by market capitalization are technology companies. Until a decade ago, many of the most valuable companies were traditional, long-standing industrial giants such as Exxon, Chevron, General Electric or AT&T.

This does not mean that traditional sectors have lost all their appeal. Saudi Aramco remains in the top 10, and Exxon, another oil giant, remains in the top 20. The financial sector and healthcare are also represented. Berkshire Hathaway leads with a market value of over $1 trillion; Visa and Mastercard are in the top 20 with a market capitalization of approximately $500 billion. Meanwhile, US healthcare companies UnitedHealth Group and Eli Lilly, and Denmark’s Novo Nordisk are also in the top 20.

Yet more often than not, the largest companies, as measured by stock market valuation, are technology companies, even if they make things (Tesla) or sell things (Amazon). properties can often continue to generate stable and predictable revenue streams for long periods of time. Tesla, for example, has monthly fees for its autopilot and self-driving features, as well as its premium connectivity package; Amazon offers all kinds of subscriptions and premium plans tied to its Alexa, Fire TV, and Kindle devices.

Today’s headlines versus strong fundamentals

Beyond a successful strategy (and product, timing, and management), the total dollar value of a company’s outstanding shares can be affected by a host of other unpredictable factors. It wasn’t that long ago that a controversial tweet from former US President Donald Trump could send stock markets into a tailspin or to new highs without much reason to support the move.

Then there are even unforeseeable events such as the Covid-19 pandemic. So-called stay-at-home stocks, especially digital platforms and those in e-commerce, posted significant gains as shutdowns and remote working boosted demand for new technologies. Conversely, tourism shares and live entertainment services plummeted. As vaccines became available and the global economy slowly reopened, the landscape shifted again: Companies that thrived during the shutdowns saw their values ​​fall, while those poised to benefit from the reopening saw a resurgence.

It can be misleading to focus too much on ever-changing stock prices, investor sentiment and world events rather than on the underlying fundamentals. Warren Buffett, the chairman of Berkshire Hathaway (currently the 8^e most valuable company), famously said that the stock market is an instrument for transferring money from the impatient to the patient.

Fear is often the driving force behind decisions when it comes to buying and selling stocks, but even in these tumultuous times, amid persistently high inflation rates, the US elections, the war in Ukraine and Gaza, and countless other geopolitical tensions and uncertainties, many companies have experienced relatively little change in terms of assets, market share, revenues, cash flow, workforce, guidance and R&D.

Market capitalization isn’t everything

This is why, to determine which is the largest, Fortune’s annual Global 500 list ranks the world’s top companies by revenue rather than market capitalization. Where does Apple, the world’s most capitalized company, rank in Fortune’s rankings? Using the revenue measure, Apple – which was in the top 10 for the first time just a few years ago – ranks only seventh globally and is, along with Amazon, the only major US technology company to be in the top 10 stands. juggernaut Walmart takes the top spot. When ranking companies based on revenue, technology stocks do less well than when ranking them based on their market value.

So why do equity investors often prefer to put money into startups that generate a lot of buzz but generate minimal or no revenue? Precisely because they hope to discover the next Apple or Amazon and make hundreds of millions of them. After all, both Steve Jobs and Jeff Bezos have always maintained that investing in future profitability through new products and services takes priority over achieving profit expectations.

There’s simply no easy way to fully determine a company’s size, influence and prospects. To that end, the annual Forbes Global 2000 list takes an even different approach: a multidimensional one. It ranks the world’s largest companies using a composite score achieved by equally weighing revenues, profits, assets and market value. Once again, different measures will produce very different results: in this ranking, financial holding company JPMorgan Chase is in first place, while Apple is only twelfth, and Walmart barely makes the top 20.

In conclusion, while it is relatively easy – based on economic, technical and organizational criteria – to distinguish a large company from a small company, it is much more complicated to determine which company is really the largest. Is it Apple, with its enormous market capitalization; Walmart, with huge revenues and more than 10,000 stores in 19 countries; or JPMorgan Chase, with its vast assets and rising profits? Size, like many things in life, is in the eye of the beholder.

Size, like many things in life, is in the eye of the beholder.

EDITOR’S NOTE: The annual Forbes Global 2000 ranks the world’s largest companies, listing the “best” based on Forbes’ composite score of revenue, earnings, assets and market value.