Summary and Key Takeaways

In this project, I examined the top 20 companies by market capitalization in 2003 and 2025. I noticed that top companies in 2025 have far fewer tangible assets than in 2003. I sought to find the magnitude of the trend and examine causes of this phenomenon.

Background and the Question

Findings

• In 2003, the top 20 companies had tangible assets equal to 44.3% of their market capitalization. That number fell all the way to 17.2% by 2025.

• This is explained by differences in market behavior and an accounting quirk that undervalues the assets of many top companies, especially tech companies.

• Internally produced intellectual property only shows up on the balance sheet as a research and development expense, with no ongoing accounting for the assets produced.

• The sectors that made up the top 20 companies shifted over time, but even within sectors tangible assets declined. For example in the communication services sector, international telecom giants with huge physical networks were replaced by Alphabet and Meta, whose main products are platforms and user data.

• The most intriguing result is the magnitude of investor confidence in AI. While the tech companies that dominated from 2003 until recently are not asset intensive, they still sit around 10% of market capitalization in tangible assets. NVIDIA and Broadcom by contrast have tangible asset to market capitalization ratios around 3%.

• This result indicates an unprecedented degree of market confidence in the ability for semiconductor producers to continue to grow at a quick pace.