Interesting and I can subscribe to most of it. On one point, however, I think that Big Tech is (once again) playing a special role here.
And that is the issue of EPS dilution. Big Tech is now so huge that it is becoming extremely difficult to keep up.
Today, Christian Röhl posted a very interesting overview: 5 of the big 7 (all except Tesla and NVIDIA) generated a free cash flow of 350(!) billion last year. That would be enough to buy the two largest German companies (SAP and Siemens) after just one year.
So why don't I see the EPS dilution here? 3 reasons:
- These massive cash flows mean that an incredible amount of cash can be put into research & development. More than other companies ever make in sales per year
- If another company becomes stronger, it is either taken over or the business is virtually taken over through massive investments (Facebook and Snap, Apple Music and Spotify,...)
- Because these companies generate such massive cash flows, you can try out a lot more things. I mean, how much money has Mark Zuckerberg burned with the Metaverse by now? Or Alphabet with its Other Bets? Amazon with Fire devices,...
Any other company would probably have to file for bankruptcy by now, with these companies it almost doesn't matter.
I see very strong parallels to soccer here. Even if Bayern don't become champions this year, they are still virtually untouchable.
Or Standard Oil and the Rockerfeller empire in the past. As long as the state doesn't break up these companies or take much more massive action against them, I don't think EPS will be diluted.
Sure, Big Tech is annoying each other (Apple vs Meta data protection, Amazon entering the advertising business, Alphabet vs Microsoft when it comes to AI,...).
But again, it's more of a "right pocket, left pocket".
And that is the issue of EPS dilution. Big Tech is now so huge that it is becoming extremely difficult to keep up.
Today, Christian Röhl posted a very interesting overview: 5 of the big 7 (all except Tesla and NVIDIA) generated a free cash flow of 350(!) billion last year. That would be enough to buy the two largest German companies (SAP and Siemens) after just one year.
So why don't I see the EPS dilution here? 3 reasons:
- These massive cash flows mean that an incredible amount of cash can be put into research & development. More than other companies ever make in sales per year
- If another company becomes stronger, it is either taken over or the business is virtually taken over through massive investments (Facebook and Snap, Apple Music and Spotify,...)
- Because these companies generate such massive cash flows, you can try out a lot more things. I mean, how much money has Mark Zuckerberg burned with the Metaverse by now? Or Alphabet with its Other Bets? Amazon with Fire devices,...
Any other company would probably have to file for bankruptcy by now, with these companies it almost doesn't matter.
I see very strong parallels to soccer here. Even if Bayern don't become champions this year, they are still virtually untouchable.
Or Standard Oil and the Rockerfeller empire in the past. As long as the state doesn't break up these companies or take much more massive action against them, I don't think EPS will be diluted.
Sure, Big Tech is annoying each other (Apple vs Meta data protection, Amazon entering the advertising business, Alphabet vs Microsoft when it comes to AI,...).
But again, it's more of a "right pocket, left pocket".
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@Mister_ultra But if they are "annoyed", this can also be the kind of competition that can lead to margin pressure and EPS dilution. 😉
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•@PowerWordChill That's right! But so far it hasn't done them any harm :D
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