Commoditization of technology and its impact on stock market dynamics and companies.
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😎 Another important process is the commoditization of technology, which is inherently unpredictable. For example, this can be seen in telecommunications technology. In the 90s and early 00s, the appearance of the Internet and mobile communications led to a surge in demand for broadband and wireless communications. Companies developing communications equipment like Cisco or Ericsson were top-performers in the pre-2000 stock market and never recovered their peak valuations. Our concept of technology in the nineties undeniably encompassed the revolution we were seeing in communications infrastructure and devices (led by companies like Cisco, Ericsson or Nokia), even more so than personal computing, which was a revolution that started in the eighties (led by Microsoft, Apple…). The course of history in the last 20 years has shifted, not only technology, but also the companies that fell under what we consider ‘tech’, as some technologies stabilize in a gradual process of commoditization. However, commoditization of technology is an unpredictable and dynamic process that often reverses: we’ve seen that with the current surge in demand for chips like Nvidia’s, which we might have considered a “commoditized” technology 5 years ago. The difficulty lies in looking at a 20-year or longer timeframe and identifying which companies are in a growing technology, which ones are in a commoditized technology, and which ones are in a declining technology. If we just aggregate all of them, it’s obvious that they will historically outpace banks, or consumer staples in the long run. Far from being just a statistical observation, this can raise questions about whether the increasingly sophisticated stock market and the dominance of indexes and algorithms poses a threat to financial stability and sustainable growth, as investment and wealth tends to concentrate on a very narrow set of companies (Magnificent Seven) that dominate the wrongly-named “tech sector”.
🤖 Another important process is the commoditization of technology, which is inherently unpredictable. For example, this can be seen in telecommunications technology. In the ’90s and early ’00s, the appearance of the Internet and mobile communications led to a surge in demand for broadband and wireless communications. Companies developing communications equipment like Cisco or Ericsson were top performers in the pre-2000 stock market and never recovered their peak valuations. Our concept of technology in the ’90s undeniably encompassed the revolution we were seeing in communications infrastructure and devices (led by companies like Cisco, Ericsson, or Nokia), even more so than personal computing, which was a revolution that started in the ’80s (led by Microsoft, Apple, etc.). The course of history in the last 20 years has shifted, not only technology but also the companies that fell under what we consider ‘tech’, as some technologies stabilize in a gradual process of commoditization. However, commoditization of technology is an unpredictable and dynamic process that often reverses: we’ve seen that with the current surge in demand for chips like Nvidia’s, which we might have considered a “commoditized” technology 5 years ago. The difficulty lies in looking at a 20-year or longer timeframe and identifying which companies are in a growing technology, which ones are in a commoditized technology, and which ones are in a declining technology. If we just aggregate all of them, it’s obvious that they will historically outpace banks or consumer staples in the long run. Far from being just a statistical observation, this can raise questions about whether the increasingly sophisticated stock market and the dominance of indexes and algorithms pose a threat to financial stability and sustainable growth, as investment and wealth tend to concentrate on a very narrow set of companies (Magnificent Seven) that dominate the wrongly-named “tech sector”.
Corrections made:
– Added apostrophes for decades (e.g., ’90s, ’00s) to indicate abbreviation.
– Corrected the placement of punctuation in relation to quotation marks as per American English standards.
– Ensured consistency in the use of “or” instead of a comma before the last item in a series.
– Added clarity and corrected minor typographical errors.
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