I’m just putting the finishing touches to my investment report on machine intelligence.
I believe this is the next great instrument of change and I’ve prepared this report as a guide for professional investors looking to get to grips with…
- Who will win and lose from this disruptive technology
- How to spot a company with tech prowess
- A new set of risks and anxieties caused by structural uncertainty
Keep an eye out for the report… I’ll send it to you early next week.
In the meantime, I want to recognize that, this week, the market witnessed a transfer of leadership…from Apple to Amazon…
The one future filled and full of growth.
The other with the air suddenly coming out of its growth, margins and charisma.
The iPhone era has peaked, and Chinese companies like Huawei, Xiaomi, OnePlus, have caught up. The smartphone sector is now about iteration, me-too, and small incremental change.
Apple is cursed with the fact that the iPhone has become the most successful product in the history of modern business, and it now needs to find a new trick.
I think it will but not in a way that will ignite the market for at least a couple of years.
Apple upsets Xi Jinping
Carl Icahn cited his concern about political conditions in China when suddenly dumping his storied Apple holding for a profit of $2 billion, possibly as much due to problems at Icahn Enterprises as anything else.
Though, he’ll probably turn out to be on the ball about China.
Apple’s recent dependence on China for 40%-50% of its growth and nearly 40% of its revenues is indeed in serious jeopardy
Its stance on encryption is antithetical to everything Xi Jinping stands for, and the clenched fist of the Chinese Party-State will make life painful for Apple from now on, way beyond shutting down iTunes and iBooks, while also serving to ‘protect’ its ‘national champions’ in consumer electronics as they strive for greater market share in the sluggish domestic market and for mid-term dominance in India, Latin America and Africa.
Top risk analyst and political scientist Ian Bremmer of Eurasia says he won’t be surprised if Apple has little or no access to Chinese consumers in five years time.
The Genius of Bezos
No such problems for Jeff Bezos at Amazon, whom Warren Buffett recently called ”a genius”.
In late 2014, Amazon Web Services turned the corner after nearly a decade of heavy investment in R&D much to the frustration and annoyance of investors who had seen Amazon lose billions on ‘wagers’ and relentlessly execute a business model focused on customer prehension and top line growth and the devil the hindmost.
AWS seemed non-core. But last week, while Apple went flat, Amazon displayed the extent to which AWS, next year a $10 billion business probably, is an engine of growth and profit in the disruptive and transformative age of the Cloud, which hardly anyone apart from Bezos could see coming.
It is part and parcel of the fearsome tech machine Amazon has developed from Recommend and low power semiconductors to warehouse robotics and AI/Alexa, not forgetting drones.Amazon has a peerless ability to create, keep and grow its e-com customer base and eviscerate the competition in the process.
There is clear blue water between AWS and the rest, led by Microsoft, which are closing the gap but are not about to catch up.
Meanwhile, just as Apple was a ‘death star’ from 2008 until 2012 for those around it sucking up the available free cash and profit, so now is AWS for other companies like IBM, EMC, Oracle threatened by Cloud-based server farms and SaaS.
Bezos: “Napoleonic genius”
More and more investment professionals are seriously asking if Amazon is ‘invincible’: whether it is on track to become the most successful and powerful business in the world–outside China– on the back of its huge, sticky and swelling customer base, that formidable tech machine, its fearsome ‘it’s day one’ culture, and the Napoleonic ‘genius’ of its founder and controlling shareholder.
What could go wrong?
Amazon is very much serial monopolist Jeff’s creature and if he goes into space or worse, tens of billions would be wiped off its market cap immediately.
And as noted Bezos relishes taking huge risks, without which he insists Amazon wouldn’t keep breaking the mould, and he often breezily admits that he’s lost billions on bad bets.
He may yet go one too far.
I think, though, it’s a fair bet that if he survives, faculties and obsessive drive intact for another five years Bezos will become the richest person in the world.
I also think– or is it a hunch?– that in ten years time the next Apple will be Apple with Icahn, if he’s still around, a major shareholder. It’ll be a service megalith, selling devices on subscription — including the Apple car, which will soon be making in roads into the $1.4 trillion global auto market.
I go into great detail in my report — the investment opportunities, the risks to your portfolio, how to invest in a machine driven world that takes great leaps forward as tech visionaries like Jeff Bezos build new platforms, new opportunities.
Feel free to contact me if want to discuss in general terms how this might affect your portfolio.