Don’t be evil. Today, seven large technology companies have market dominance, and mutually reinforcing factors make it almost impossible to displace them. How does this impact investor decision-making, particularly given their weighting in equity indices, and innovation? And how might antitrust regulation threaten their market power?

Speaker:

Mark Baribeau, Managing director, head of global equity, Jennison Associates

Moderator: Laurence Parker-Brown, Institutional content producer, Conexus Financial

Key Takeaways

  • The outperformance of US tech giants this year is due to strong fundamentals, and not to a flight to safety or quality from investors or central bank intervention
  • Baribeau said he was not surprised by the “huge bifurcation” that had seen technology companies leap ahead–particularly companies getting their products direct to consumers via ecommerce or omni-channel retailing, and those working on digital transformation of enterprises
  • Baribeau said he believed Tesla’s Model S in 2012 was the most important consumer product innovation since the iPhone in 2007, disrupting an industry that had long been lacking in innovation.
  • With major increases in production capacity underway, revenue could climb from $30 billion this year to $75-$90 billion in 2024, which the market is excited about, leading to market cap expansion this year.
  • When asked if he was concerned about the market dominance of US tech giants preventing new entrants or even stifling innovation, he said he wasn’t. New entrants just need to capture the imagination of the consumer, they don’t necessarily need huge R&D budgets
  • He gave the example of TikTok which “came out of nowhere globally” despite competing against cash-rich giants Facebook and Tencent. Canadian e-commerce company Shopify had managed to become the third largest e-commerce retailer in the US ahead of Wall-mart and Apple at the end of 2019.
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