FAANG Stocks: Definition and Companies Involved

What Are FAANG Stocks?

In finance, “FAANG” is an acronym that refers to the stocks of five prominent American technology companies: Meta (META) (formerly known as Facebook), Amazon (AMZN), Apple (AAPL), Netflix (NFLX); and Alphabet (GOOG) (formerly known as Google). 

The term was popularized by Jim Cramer, the television host of CNBC's "Mad Money," in 2013, who praised these companies for being “totally dominant in their markets." Originally, the term "FANG" was used, with Apple—the second “A” in the acronym—added in 2017.

Understanding FAANG Stocks

In addition to being widely known among consumers, the five FAANG stocks are among the largest companies in the world, with a combined market capitalization of around $9 trillion as of Q2 2024.

Their substantial growth has been buoyed by high-profile purchases made by large and influential investors such as Berkshire Hathaway (BRK), Soros Fund Management, and Renaissance Technologies. These are just a few of the many large investors who have added FAANG stocks to their portfolios because of their perceived strength, growth, or momentum. 

Each of the FAANG stocks trades on the Nasdaq exchange and is included in the S&P 500 Index. Since the S&P 500 is a broad representation of the market, the movement of the market mirrors the index's movement. As of Aug. 8, 2024, the FAANGs make up about 17.3% of the S&P 500 as represented by the SPDR S&P 500 ETF—a staggering figure considering the S&P 500 is generally viewed as a proxy for the United States economy as a whole.

This large influence over the index means that volatility in the stock price of the FAANG stocks can have a substantial effect on the performance of the S&P 500 in general.

Influence of FAANG Stocks

The extraordinary size and influence of the FAANG stocks have prompted concerns about a potential bubble in FAANG stocks. These concerns started gaining prominence in 2018, when technology stocks, which had been driving consistent gains in the stock market, began losing their former strength.

The level of volatility sometimes shown by FAANG stocks—and the oversized influence these stocks can have on the market overall—is a source of concern for some investors.

On the other hand, those who believe in the fundamental strength of the FAANG stocks have abundant evidence for this claim. For example, Facebook is the world’s largest social network with approximately 2.9 billion monthly active users as of April 2024.

Amazon, meanwhile, has become a seemingly insurmountable force in business-to-consumer (B2C) e-commerce with over 600 million products for sale and over 310 million active customers worldwide.

The Bottom Line

Meta, Apple, Amazon, Netflix, and Alphabet comprise the "FAANG" stocks, which is the grouping of the most highly successful technology stocks.

These companies are some of the largest companies in the world based on market capitalization as well as the most influential and powerful based on their popularity and market share, as well as the degree to which they shape the industry they operate in and the world at large.

Their growth has brought great returns to investors and they make up a big chunk of equity indexes. Despite their success, there continue to be concerns about their overvaluation, their business strength, and the risks involved with their influence and power.