China’s Big Tech crackdown is a very serious action that has me thinking about this country’s own Big Tech landscape…
Particularly, it got me thinking about Big Tech’s U.S. dominance…
Is Big Tech really untouchable? Are they really these enormous monopolies that have no chance of being overthrown?
My answer is simple: No. Not at all. In fact, I think the opposite may be true.
Big Tech Is Dead
I don’t mean that in the sense that the likes of Facebook, Amazon, Alphabet, and Netflix are all going to wither away and die as companies. No. Far from it. Each of them has become so engrained in our lifestyles that their platforms and services have staying power.
Rather, I think their stocks are “dead money.”
That’s because when it comes to Big Tech stocks, the consensus is that they’re untouchable, and therefore, their stocks are priced for continued dominance for many years to come. Yet, the fundamentals underlying each Big Tech company show that these giants are losing their chokeholds over the industries they created not too long ago.
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Those deteriorating fundamentals will upend the current premium valuations underlying Big Tech and cause Big Tech stocks to go nowhere for years.
Let’s start with Facebook (NASDAQ:FB).
Who uses Facebook anymore? I mean, c’mon… we all have a Facebook profile because it’s like the “internet ID”… but much like your real ID, you only use it when you have to. Facebook is not something most folks use anymore for entertainment, or information, or anything besides social “housekeeping.”
It’s yesterday’s top social media platform.
Sure, the Facebook ecosystem includes Instagram, and Instagram is cool. But even that “cool” platform is losing mindshare to trendier, even cooler visual apps like Snapchat (NYSE:SNAP) and TikTok.
Meanwhile, Messenger and WhatsApp have durable appeal. But they’re messaging platforms, and messaging platforms are notoriously difficult to monetize unless you charge for them. And the moment Messenger and WhatsApp aren’t free is the moment they aren’t popular anymore.
Fallen Leaders
How about Amazon (NASDAQ:AMZN)? Yes, we all still shop on Amazon.com. But five years ago, Amazon was the only game in town. Now, consumers have options.
We have Walmart (NYSE:WMT), Target (NYSE:TGT), and Home Depot (NYSE:HD) – our favorite brick-and-mortar stores have all shifted online.
We have Wayfair (NYSE:W), Etsy (NASDAQ:ETSY), and Chewy (NYSE:CHWY) – new e-retail platforms have emerged to specialize in specific shopping verticals.
And how about all those Shopify (NYSE:SHOP) stores? They’re everywhere these days.
In other words, our online shopping habits have been democratized. And while Amazon.com is still growing, it’s growing much less quickly than the likes of Shopify, Wayfair, Etsy, and Chewy. In fact, Amazon has one of the slowest growing e-commerce businesses in the industry.
It’s an incumbent with eroding market share… not great…
Moving on to Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), we may have the worst of Big Tech here – the one giant tech company that is most at-risk from meaningful disruption in the coming years.
Google Search is losing ad-dollar market share to visual-heavy platforms, like Snapchat and TikTok, because Google Search sells text-based ad real estate, which is significantly less engaging and valuable than the visual-based advertising real estate Snapchat and TikTok are selling – and pretty much everyone else in this space for that matter.
Google’s self-driving unit, Waymo, appears to be in shambles. It’s been losing talent left and right over the past few months, including the unit’s longtime CEO. I’m hearing murmurs from folks in the self-driving industry that Waymo – once considered the runaway leader in AVs – is losing its lead, and if current trends persist, this company may not even be a major player in self-driving once the tech becomes real.
Then you have Google Cloud, which is really falling behind, too. And while the smart home products from Alphabet are cool – we have Google Minis everywhere in our home – that’s not a huge enough business to offset slowing growth everywhere else.
Alphabet is in trouble.
Then there’s Netflix (NASDAQ:NFLX). I can’t even tell you how many people have come up to me over the past few months and said something like, “Netflix is getting boring” or “Netflix content isn’t cutting it anymore.”
Two years ago, my friends and I used to talk about all the Netflix shows to watch. Now, we’re talking about all the Disney+, HBO Max, and Peacock shows to watch.
It’s a different world. And in this world, Netflix has a ton of competition and is losing viewership share.
So… I rest my case… Big Tech is dead.
The Next Step in Tech Investing
The companies themselves aren’t going to die overnight. But their dominance will erode, and Big Tech stocks will be dead money for the next few years. These once untouchable giants are losing market share to hungrier, more innovative tech startups.
The investment implication? Forget Big Tech – buy the tech startups unseating Big Tech.
That’s what we’re doing at Innovation Investor – my exclusive, venture-capital-style research advisory focused on investing in the next wave of hyper-innovative, hypergrowth technology companies.
