Many regular citizens may associate “Maama” with a Hindi colloquial for a person’s maternal uncle, as pointed out by Indian billionaire and the world’s richest banker, Uday Kotak. However, a trader would recognize a starkly different definition.
In the financial world, MAMAA represents a powerful group of tech companies: Meta, Apple, Microsoft, Amazon, and Alphabet, Google’s parent company.
MAMAA is the updated spin-off of the term, FAANG, which was initially coined in 2013.
In 2021, Microsoft and Meta replaced Netflix and Facebook, respectively, as the top technology giants following a sharp plunge within Wall Street’s main indexes.
This reflects the evolving landscape of technology companies that Indian investors must continue to assess for a successful trading career. Below, we delve into the world of MAMAA stocks.
Understanding MAMAA stocks
Meta, Apple, Microsoft, Amazon, and Alphabet are not just companies. They are economic powerhouses, and their stocks are often sought after by investors around the globe.
MAMAA stocks are frequently traded on prominent world indices, making them readily accessible to investors. These indices include the S&P 500, NASDAQ, and other major exchanges where they are given significant weight.
The prominence of these stocks in global indices reflects their sheer size and influence. Thus, many investors opt to trade indices rather than invest in a single company to get exposure to a basket of leading tech firms. Trading on indices can also provide a level of stability, reducing the risks associated with investing in individual stocks.
It’s no surprise that MAMAA stocks are a favorite choice among traders looking to tap into the tech industry’s growth without putting all their eggs in one basket.
MAMAA in the Indian economy
MAMAA stocks account for 22% of the S&P 500’s market cap, and this pattern of dominance of mega-corporations in market capitalization has been reflected within the emerging market of India.
A significant structural shift in the Indian economy over the last decade has been the formalization of various sectors.
Reforms like the Goods and Services Tax (GST) have also had a profound impact on the informal sector, which previously thrived on tax arbitrage.
According to the Economic Times, when India embarked on economic liberalization in 1991, the top 20 companies accounted for around 14% of India Inc.’s net profit. This figure has risen steadily, reaching 52% in 2010. As of 2022, the top 20 mega-companies account for approximately 75% of India Inc.’s net profit.
Yet, some highly profitable companies such as ONGC and Coal India still have not secured a top position in market cap, reflecting the complexity of market dynamics in India — unlike MAMAA stocks which have proven their lasting dominance.
Thus, Indian traders have to be discerning when choosing which stocks to invest in. On the positive side, MAMAA stocks are part of an elite club of companies that have access to cheaper capital, superior human resources, and cutting-edge technology.
They are also well-equipped to withstand market shocks, which is a significant advantage. Meanwhile, the divergence between profits and market cap highlights that some highly profitable companies do not secure the top positions.
In India, the market cap often reflects the market’s perception of a company’s potential, which can be influenced by factors beyond current profits. Traders must weigh these factors when considering MAMAA stocks as an investment option.
An updated look at MAMAA
As we turn our attention to the present, the competition among MAMAA stocks remains fierce. These tech giants are constantly evolving, innovating, and expanding their reach.
Recent news developments underscore their determination to maintain their dominance, with Meta unveiling its newest project, the open-source AI model Llama 2, in July 2023.
This is intended to compete directly with tech giants like OpenAI and Google.
Let’s take a closer look at these recent news developments which underscore the determination of MAMAA to maintain their dominance.
Meta
In the midst of balancing AI, the Metaverse, and an efficiency pledge, Meta stocks have been propelled to the second-best performance in 2023 in the S&P 500. Shares sunk in 2022 after Meta reported a 4.5% yearly decrease in overall revenue and a 50% drop in profits.
However, market analysts anticipate 2023 earnings of $3.64 (around ₹302) per share from revenue of $33.6 billion (around ₹2.794 trillion) — a 122% earnings increase — especially after Meta launched Advantage+, an AI-powered ad tool for businesses, to compensate for changes made by Apple.
Indian traders should keep an eye on Meta’s advancements in AI. The technology landscape is evolving rapidly, and the influence of AI is pervasive. Meta’s foray into open-source AI could have far-reaching implications, not just for the company but for the broader tech industry.
Apple
Apple is not one to be left behind in the tech race. The company is making serious strides in the field of generative AI. Apple’s pursuit of generative AI is aimed at challenging the dominance of Google and Microsoft, with large language model (LLM) Ajax in the works.
In the broader picture, Apple’s developments could make up for its slide. Its market cap shrunk by about $1 trillion (around ₹83 trillion) in early 2023, following the iPhone ban imposed in China and the competitive product launches by rival Huawei. With the recent release of the iPhone 15, analysts posit that Apple’s stock may revisit its prior swing-low at $173.54 (around ₹14,418).
Microsoft
Microsoft, too, is in the race to challenge the dominance of Google and Apple, but it’s taking a different route. The tech giant is considering the development of a ‘super app’ that combines shopping, messaging, news, web search, and more. This ‘super app’ aims to challenge the hold that Alphabet’s Google and Apple have on the mobile search space.
Microsoft’s entry into the ‘super app’ arena reflects the company’s determination to remain competitive and cater to evolving user needs, with Microsoft shares beating Wall Street estimates in October.
Shares jumped 6% in extended trading after the software maker issued fiscal first-quarter results and quarterly revenue guidance, and investors remain optimistic following the revenue growth of Azure cloud.
Amazon
Amazon’s ambitions extend beyond the digital storefront. Amazon Web Services (AWS) remains a key player in cloud computing, providing a wide range of services to businesses worldwide. Yet, this has been seeing slower sales growth due to less software spending by businesses. Competition from Chinese e-commerce companies and the Federal Trade Commission’s antitrust suit add to this slower performance as well.
Nevertheless, Wall Street analysts are increasingly bullish on Amazon stocks, with the e-commerce giant retaining its exposure to affluent consumers, advertising opportunities and “significant potential for e-commerce margin improvement,” according to Analyst Jason Helfstein. Amazon stocks climbed as much as 3% in heavy volume in October 2023, closing up at $128.35 (around ₹10,676).
Alphabet
Beyond search, Alphabet has a significant presence in areas like online advertising, cloud computing, autonomous vehicles, and life sciences. This brought in $1.55 (around ₹128) earnings per share and $76.6 billion (around ₹6.37 trillion) in sales during a three-month stretch ending in September 2023.
However, cloud revenue still disappointed, causing a drop in stocks of almost 7% in extended trading. Alphabet attempted to catch Amazon Web Services and Microsoft Azure amidst a weakened core advertising, caused by economic softening and increased competition from TikTok. Nevertheless, Alphabet remains optimistic with cloud still having grown 22% from a year earlier, alongside the recent positive performances of the Waymo self-driving car business and the Verily life sciences unit.
Indian traders should closely monitor developments in these companies, as their strategies and innovations can have far-reaching repercussions in the trading world. Stay informed, stay competitive, and adapt to the ever-evolving landscape of MAMAA stocks.
