The Curious Case Of Big Tech

Summary

• Over the last ten years (2013-2022), Big Tech collectively generated $2.3 Tn Operating Cash Flow, slightly more than double their aggregate market cap ten years ago.
• Investors were surprised to understand the capital intensity of Alphabet and Meta’s core businesses whereas they likely grew a bit tired of Amazon’s relentlessness and started entertaining a healthy amount of skepticism about their ROI on recent investments.
• While nobody quite expects that the capital intensity will return to the level of 2012-2017 period, it is certainly conceivable that investors extrapolating the recent capex bonanza till eternity may turn out to be a key source of alpha for long-term investors.

metamorworks

“Most people overestimate what they can achieve in a year and underestimate what they can achieve in ten years.”

While most market participants want to focus on what happens next quarter or the next year, it is often revealing