# GAFAM Stocks: What They are, How They Work

## What Are GAFAM Stocks?

GAFAM is an acronym for five popular U.S. tech stocks: Google (Alphabet), Apple, Facebook (Meta), Amazon, and Microsoft. 

GAFAM is quite close to, but nonetheless different than, the more popular [FAANG](https://www.investopedia.com/terms/f/faang-stocks.asp) acronym which collectively indicates U.S. technology stocks: Facebook, Apple, Amazon, Netflix, and Google. In the latter, Netflix takes the place of Microsoft.

### Key Takeaways

*   GAFAM is an acronym for the stocks of American technology companies: Google (Alphabet); Apple; Facebook (Meta); Amazon; and Microsoft.
*   FAANG stocks include much the same stocks, but replaces Microsoft with Netflix.
*   GAFAM is somewhat more focused on technology stocks than FAANG, since Netflix is considered a consumer services and media company.

## Understanding GAFAM Stocks

While a lot of [market indexes](https://www.investopedia.com/terms/m/marketindex.asp) exist to collectively track the developments of a sector, there are a handful of companies that lead the pack in terms of sector influence. [FAANG](https://www.investopedia.com/terms/f/faang-stocks.asp), GAFAM, and [BATX](https://www.investopedia.com/terms/b/batx-stocks.asp) are acronyms for influential companies that have a large impact on their sectors, and the market as a whole.

GAFAM is made up of Alphabet Inc.([GOOG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=googl)), Apple Inc. ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=aapl)), Meta ([META](https://www.investopedia.com/markets/quote?tvwidgetsymbol=META)) ([formerly Facebook](https://www.investopedia.com/facebook-fb-rebrands-itself-as-meta-5207628)), Amazon.com Inc. ([AMZN](https://www.investopedia.com/markets/quote?tvwidgetsymbol=amzn)), and Microsoft Corp. ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=msft)). All five companies are listed on the [NASDAQ](https://www.investopedia.com/terms/n/nasdaq.asp) stock exchange.

## GAFAM Versus FAANG

Among the commonly used FAANG group of companies, Netflix is the only one belonging to the “[consumer services](https://www.investopedia.com/terms/c/customer-service.asp)” sector and “consumer electronics/video chains” sub-sector owing to its media content business, while the other four belong to the “[technology](https://www.investopedia.com/terms/t/technology_sector.asp)” sector.

The term GAFAM was coined to replace Netflix with Microsoft in the list, making it a group of more technology-focused companies.

While Amazon is also classified under the “consumer services” sector and “catalog/specialty distribution” subsector, it also has its [cloud hosting](https://www.investopedia.com/terms/c/cloud-computing.asp) business and Amazon Web Services (AWS), which make it a significant contributor to the technology space.

Essentially, GAFAM represents the U.S.'s technology leaders whose products span mobile and desktop systems, hosting services, online operations, and software products.

The five GAFAM companies have a joint market capitalization of around $4.5 trillion and are all within the top 10 companies in the US according to [market capitalization](https://www.investopedia.com/investing/market-capitalization-defined/) as of March 31, 2020.

Among GAFAM stocks, the oldest company to list on the stock exchange is Apple which had its [initial public offering](https://www.investopedia.com/terms/i/ipo.asp) (IPO) in 1980, followed by Microsoft in 1986, Amazon in 1997, Google in 2004, and Facebook in 2012.

## Example How GAFAM Is Used in the Real World

Alphabet, Apple, Meta, Amazon, and Microsoft are big players in the technology space.

Many investors believe that if these stocks are doing well, the entire sector likely is as well. In a way, these stocks act like an index for the technology sector.

Heading into early 2020, the [Nasdaq 100 index](https://www.investopedia.com/terms/n/nasdaq100.asp) was rising. GAFAM stocks were also rising. Meta was the first one to break lower, peaking in late January 2020. The other GAFAM stocks and the Nasdaq 100 continued to advance.

![Nasdaq 100 versus GAFAM stocks](https://www.investopedia.com/thmb/MG3_kbvwnVTCPxd1Vr2bm05xB4A=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/NasdaqverusGAFAM-9ca41784e9ac407198ae30f4fba63c93.jpg)

*Nasdaq 100 Versus GAFAM Stocks.*

Apple put in its peak on Feb. 12, Microsoft on Feb. 10. The Nasdaq put in its peak on February 19. Therefore, by the time the Nasdaq peaked, three of the five GAFAM stocks were already heading lower. Alphabet and Amazon peaked on the same day as the Nasdaq ([closing price](https://www.investopedia.com/terms/c/closingprice.asp) basis).

Monitoring the GAFAM stocks may have alerted investors that the technology sector was weakening, even though the Nasdaq 100 was still rising. That said, GAFAM stocks are not always a reliable indicator of what the sector will do.