Technological sector updates
Join myFT Daily Digest to be the first to have news on the tech sector.
Future history of the Great Pandemic that began in 2020 will have to devote entire chapters to the role of technology. If the coronavirus had struck even a decade earlier, the ability to reduce its spread through social distance – with many people, at least in the developed world, would have been able to work, buy, learn and entertain and keeping in touch, all from home have been much less.
Responding to the increase in demand requires great efforts from the big technology companies. But this week made clear the rewards they pick. The five largest technology companies – Apple, Amazon, Alphabet, Microsoft and Facebook – together made $ 75 billion in profit after tax in the second quarter, nearly 90 percent higher than a year earlier, and 30 percent higher than expected. Their combined revenue rose more than a third to $ 332 billion, even though Amazon was slightly shot too short of expectations; annually that with $ 1.3 tons they would almost equate to the gross domestic product of Spain.
Companies in a range of other sectors also benefited from the strengthening economic recovery. But suggestions that large technology companies, which performed better during the constraint, would be surpassed by other repair companies if the economies reopened were unfounded. Their performance in the pandemic instead proves not a temporary upswing that will recede, but a permanent leap forward in the global transition to online goods and services. Changes in consumer and corporate behavior persist.
This shift has enabled Big Tech over the past year to turn on its head the conventional wisdom that only new businesses can offer explosive growth. Putting world-leading profits and earnings at multiples closer to those of growth stocks already leads to valuations never seen before. Apple only became the first trillion-dollar business in the world in 2018; all the top five have now surpassed the level. Their combined value is more than $ 9 tons.
Growth cannot be sustained at these levels; even the technical titans will facing headwind in the coming quarters, ranging from their own much more difficult comparative figures to the deteriorating deficit. But the boost to Big Tech’s market share and power will remain.
The pressure for antitrust regulation, then, will only grow. It must be handled with care; popular, successful businesses should not be penalized simply because they are big. Since various services are provided free of charge to consumers (in the form of barter for profitable personal data), or prices fall, these are the conventional measures to disadvantage consumers who are looking for rising prices. Innovative approaches to assessing market power and combating abuse will be needed – built on the work of academics such as Lina Khan, appointed by the Biden White House as head of the Federal Trade Commission.
The acceleration of the online shift also runs the risk that regulators and policymakers may still keep up. As the pandemic is not over yet, it presents a challenge to governments, businesses and individuals to find ways to have an impact – both beneficial and negative – on the world of work, in cities, personal privacy, news and information, even on democracy. . The danger is also that the digital economy may become even more unbalanced and the wealth disparities widen. More efforts will be needed to combat ‘digital exclusion’, within developed economies and in the developing world.
It is becoming increasingly clear that the post-pandemic world will look different from the old one in many ways. As this week’s numbers highlighted, embedding digital technology is one of the most visible and enduring.