14 June 2018 | 5 min read
What Was the First Billion Dollar Company? A Short History of Market Cap Milestones
The market capitalisations of the tech giants Apple, Amazon, Alphabet and Microsoft have each soared towards a trillion dollars, sparking speculation as to which company will be the first to reach a 13-digit market cap.
Is there anything meaningful to say about the attainment of such large round numbers? At the very least, these markers provide a snapshot into different eras. And as the following chart shows, different industries have previously produced the first company to exceed other milestones, which we keep throughout at nominal valuations.
![](https://cdn.winton.com/images/News/Images/Winton-News-2018-06-Market-Cap-Milestones-5.png)
The Closest Market Cap Milestone Race Since the 1950s
The sequence broadly tracks the technological frontier of the US economy: demand for raw materials propelled US Steel over the $1 billion mark at the start of the 20th century; manufacturing pushed General Motors to $10 billion; computer hardware accounted for the next waypoint, with IBM’s market cap reaching $100 billion in 1987; and computer software took Microsoft to $500 billion before the dotcom bubble burst. It follows, then, that the contenders for the $1 trillion mark include the largest firms in internet services.
A review of the CRSP database on US-listed public securities shows that the market cap milestone race hasn’t been this close since the 1950s, when GM, Du Pont, AT&T and the Standard Oil Company of New Jersey were clustered closely around $10bn. In the race to $100bn and $500bn, IBM and Microsoft were well ahead of the next three largest companies.
![](https://cdn.winton.com/images/News/Images/Winton-News-2018-06-Market-Cap-Milestones-7.png)
Mixed Subsequent Performance From Milestone Companies
How have early milestone crossers tended to fare? The following chart shows the performance of our first $10bn, $100bn and $500bn companies relative to the Dow Jones Industrial Average in the decade after crossing their respective valuation milestones.
![](https://cdn.winton.com/images/News/Images/Winton-News-2018-06-Market-Cap-Milestones-8.png)
The psychology literature describes the existence of anchoring effects in finance, whereby investors can place undue weight on round numbers. However, a quick look at this very small sample reveals no pattern. This might suggest that – while these milestones make good headlines – markets could pay more attention to other factors.