Are Current Big Tech Firms About to Become Obsolete?
March 2, 2022
The aging behemoths are almost ready for an elder care facility, according to the CNBC article, “Are Tech Giants ‘Sunsetting’? Strategists Warn of Big Tech Under Pressure.” Journalist Weizhen Tan cites strategists from investment firms Macquarie and Baillie Gifford. She writes:
“Investment bank Macquarie said large consumer tech companies like Facebook and Amazon are in the ‘sunsetting’ phase. ‘You have to be very careful when you approach companies like [Facebook-parent] Meta or Alphabet because as I said, in my view, they are sunsetting. They’re suffering from a number of issues,’ Viktor Shvets, head of global and Asian strategy at Macquarie Capital. He also named other companies like i-Phone maker Apple and Chinese e-commerce platform Alibaba. Headwinds may include ‘major economies of scale,’ as well as significant political and social pressure, Shvets told CNBC’s ‘Street Signs Asia’ on Thursday. ‘So be very careful about these large digital platforms, but there are a lot of opportunities and profitable opportunities in the rest of [the] tech universe,’ he said. Both American and Chinese tech giants have come under regulatory scrutiny in recent years. In the past year, Chinese authorities cracked down on its tech companies, introducing legislation targeting areas from anti-monopoly to data protection. … In the U.S., President Joe Biden last year signed a new executive order aimed at cracking down on anti-competitive practices in Big Tech, among other sectors.”
For Chinese companies, the regulatory crackdown has meant a drop of over 40% in the Hang Seng Tech index in the past year. However, according to Baillie Gifford strategist Roderick Snell, increased competition is an even bigger threat to large Chinese tech firms. But both these factors may pale in comparison to another pressure Shvets describes: the transition from “second-generation” to “third-generation” (largely metaverse) technologies. If the previous transition is any indication, only one or two large companies will survive the shift. Microsoft was the lone survivor then, but which firms will see the other side of this passage? Sadly for investors, that answer remains unclear.
Cynthia Murrell, March 2, 2022
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