According to an analysis by credit rating agency Moody's, cash and liquid investments at US non-financial companies are poised to rise about 5% to $1.9 trillion at the end of 2017 — a new record.
This cash pile is concentrated with five key holders, which together will own 35% (Apple will account for 15%) of the total, up from 32% at the end of 2016. Apple, Microsoft, Google parent Alphabet, Cisco Systems and Oracle are on track to hold a cumulative $679 billion in cash at the end of calendar 2017, up 16% year-on-year.
The cash hoarding in the tech sector as a whole is expected to take the tech sector's portion of total cash to 47% at the end of this year according to Moody's report, that up from 31% in 2017.
Interestingly, most of the cash balance being hoarded by tech firms is offshore, indicating that these cash piles are growing as a result of the US's onerous repatriation taxes. Indeed, overseas cash at the top five holders is set to hit $594 billion, or 88% of the total cash balance at these firms at the end of calendar 2017. Last year, the same set of companies had $512 billion stashed offshore, the same percentage (88%) of the overall total.
Moody's analysts estimate that corporate cash held offshore will reach about $1.4 trillion, or 72% of total cash in 2017, up from $1.3 trillion, or 70% of total cash in 2016.
As the Financial Times reported at the end of September, there may be these corporate cash piles than first meets the eye.
Corporate Cash Mountain And The World's Largest Hedge Fund
According to an FT analysis, the 30 largest US corporate cash hoarders own nearly $900bn in US debt and equities. Of this total, more than $400 billion is US corporate bonds, around 5% of the total outstanding market.
These holdings throw a cloud of uncertainty of these supposedly safe cash balances. For example, figures from the FT show that a 1% ump in interest rates would result in a $4.9 billion paper investment loss for Apple. Meanwhile, Oracle has declared that it could suffer mark-to-market losses of nearly $350m if rates rise by half a percentage point and Microsoft says it could lose more than $200m in a single day if there were an “adverse” market shock. The company has 84% of its $133 billion cash pile invested in US government and agency securities.
