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Are the tech giants entering the ‘sunset’ phase?

Many strategists have recently warned of the myriad challenges and pressures facing major US and Chinese tech companies .

Viktor Shvets, head of global strategy at investment bank Macquarie Capital, said on CNBC on February 10 that major consumer technology platforms like Facebook and Amazon are in a “sunset” phase. Shvets also named other major tech firms such as Apple and Chinese e-commerce platform Alibaba. Both of these tech giants have come under intense regulatory scrutiny in recent years.

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Experts warn investors to be cautious if they want to pour money into US and Chinese internet giants

“You have to be very cautious when approaching companies like Meta or Alphabet, because like I said, they are going downhill from my point of view. They are facing some problems. So be very careful about these big digital platforms. However, there is still a lot of opportunity and profitability in the rest of the tech industry,” said Shvets.

Last year, the Beijing government tightened its grip on domestic technology companies, introducing legislation targeting a wide range of areas, from antitrust to data protection. Shares of Tencent, Alibaba and Didi sold off last year because of regulatory troubles. In the US, President Joe Biden signed a new executive order aimed at preventing anticompetitive behavior by Big Tech, as well as in other areas.

Bet on the next generation of technology

According to Mr. Shvets, the world is moving from second-generation technology to third-generation technology. The question is: which tech companies will survive that massive transition?

“One thing we’ve learned in the transitions is that only one or two companies actually make it through. For example Microsoft is really the only major tech company to move from first generation to second generation, almost no one else has. Which of the big digital platforms do you think today’s big companies have the greatest real opportunity, or ability, or capacity to overcome? Right now, things are not clear. Should you bet on Meta, should you bet on Google, should you bet on Alibaba? There is no clear answer.”

Mr. Shvets did not specify what the third-generation technology transition would entail, but the buzz around Web 3.0, or the next generation of the internet, began to emerge strongly towards the end. last year. The “metaverse” virtual superuniverse broadly refers to a virtual world where humans interact through a three-dimensional avatar. In that space, users can participate in virtual activities such as gaming, concerts or live sports, controlled through virtual reality (VR) glasses or augmented reality (AR) devices. . Meta, Apple, Microsoft, and Google are preparing to release new hardware products and software services for the metaverse.

Late last year, Facebook changed its name to Meta, reflecting the company’s growing ambition to capture the future of the internet in the virtual world. However, shares of Meta plunged in early February, recording their biggest one-day drop, after the company forecast weaker-than-expected revenue growth for the next quarter. Meta reports that its Reality Labs business posted revenue of $877 million in the fourth quarter of 2021, with an operating loss of $3.3 billion.

China’s “fiercely competitive” market

Roderick Snell, chief investment officer at investment management firm Baillie Gifford, said China’s big tech companies are not only under immense regulatory pressure, but are also facing a lot of competition. strong.

“I still think the biggest problem for Alibaba, Tencent in China has always been the fiercest competition in emerging markets. 40% of Tencent’s social media advertising market share has gone to other players over the past three or four years,” Snell told CNBC on Feb.