Larger consumer big tech companies like Facebook and Amazon are in the sunsetting phase, says strategists. Caution has been sounded for investors looking to put their money as such companies are facing a myriad of challenges.
Viktor Shvets, head of global and Asian strategy at Macquarie Capital, said one has to be very careful when approaching companies like Meta, Apple, Alibaba or Alphabet as they are sunsetting. “They are suffering from a number of issues. Headwinds may include major economies of scale as well as significant political and social pressure.”
Shvets believes investors have to be careful about these large digital platforms. “But there are a lot of opportunities and profitable opportunities in the rest of the tech universe.”
In recent years, both American and Chinese tech companies have come under regulatory scrutiny. Chinese authorities in 2021 cracked down on its tech companies. Beijing introduced legislation targeting areas from anti-monopoly to data protection.
In regards to China, Roderick Snell, an investment manager at Baillie Gifford highlighted that while China’s big tech companies are under tremendous regulatory pressure, they are also facing a lot of strong competition. He said his firm has been underweight on big tech names such as Alibaba and Tencent for the last couple of years. “I still think the biggest issue for the likes of Alibaba, Tencent in China is always the most ferociously competitive market in the emerging markets.”
And in the United States, President Joe Biden signed a new executive order aimed to crack down on anti-competitive practices in big tech, among other sectors.
Drawing focus on China and the US, Shvets said the world is set to transit from second-generation technologies to third-generation. The question, now, at the fore is which tech companies will survive the major transition. “One thing we have learned in those transitions is that only one or two companies actually make it through. So for example, Microsoft is really the only major technology company to move from first generation to second, pretty much nobody else has done that,” he explained. “So the question with those large digital platforms, which one of those companies do you think has the greatest opportunity or possibility or capacity to actually transit. And right now its not clear – should you bet on Meta, should you bet on Google or should you bet on Alibaba? Its unclear.”