Big Tech Are Falling Knives
The competitive playing fields are evening out, and Big Tech is losing its edge. It's time to buy the tech startups that are unseating them.
[Editor’s note: “Big Tech Are Falling Knives” was previously published in April 2022. It has since been updated to include the most relevant information available.]
I make a lot of bold claims. And one of my biggest, boldest, wildest of all time is that Big Tech is dead.
I first said that back in July 2021. No one listened at the time. In fact, everyone thought I was nuts.
It’s part of the nature of being a tech entrepreneur and an early-stage investor. Most people see the world as it is today. I see the world as it will be in five, 10, 15-plus years. That means I sound a bit out there sometimes. But that perception also helped me become the world’s No. 1 stock picker.
Indeed, look what’s happening now.
All the once-unstoppable Big Tech stocks are crashing. We saw a 65% drop in Netflix (NFLX) and a 60% decline in Meta (META) stocks. And Nvidia (NVDA) stock fell 60%, too.
It’s a bloodbath. And now everyone is asking: Is Big Tech dead?
In short, yes. Separate from the 2022 selloff, small-cap stocks killed them.
Competition Has Caught Up to Big Tech
Many think my rationale for believing Big Tech is dead hinges on government regulation, consumer boycotts over censorship, or even the turbulent macroeconomic environment.
But my rationale for claiming Big Tech is dead is much more fundamental in nature.
It’s dead because of competition.
In short, Big Tech became what it is by leveraging first-mover advantages in emerging tech industries. Amazon (AMZN) turned into a trillion-dollar company because it pioneered the e-commerce industry. Meta became a tech giant because it founded social media. And Netflix reached its height because it established TV streaming.
Now, though, those first-mover advantages are disappearing. We’re 10-plus years into the e-commerce, social media, and TV-streaming revolutions. Every retailer is selling online these days. Every website has an app, and every media company has a streaming platform.
The playing fields in the industries that Big Tech have dominated are “evening out.”
As they are, Big Tech is losing its edge.
Meta and Netflix are seeing a novel drop in users. Amazon’s e-commerce sales growth has flipped into negative territory. Alphabet‘s (GOOGL) hypergrowth YouTube business is slowing for the very first time. Nvidia’s GPU performance lead is narrowing.
These examples aren’t just one-off phenomena. They are indicative of a broader trend, where small tech stocks are disrupting big tech stocks.
Meta: Fallen Big Tech Titan
Let’s look at the demise of Big Tech on a case-by-case basis, starting with everyone’s favorite: Meta.
Who uses Facebook anymore? I mean, come on! Most of us have a Facebook profile because it’s like the “internet ID.” But much like your real ID, you only use it when you must. Facebook is not something most folks use anymore for anything besides social “housekeeping.”
It’s yesterday’s social media platform.
Sure, the Facebook ecosystem includes Instagram, and Instagram is cool. But even that “cool” platform is losing mindshare to trendier visual apps like Snap (SNAP) and TikTok.
Meanwhile, Messenger and WhatsApp have durable appeal. But they’re messaging platforms, and those are notoriously difficult to monetize unless you charge for them. And the moment Messenger and WhatsApp aren’t free is the moment they aren’t popular anymore.
The verdict on Meta? It’s over the hill.
How about Amazon? Yes, we all still shop there. But five years ago, Amazon was the only game in town. And now consumers have options.
We have Walmart (WMT), Target (TGT) and Home Depot (HD). Our favorite brick-and-mortar stores have all shifted online.
There’s Wayfair (W), Etsy (ETSY) and Chewy (CHWY). New e-retail platforms have emerged to specialize in specific shopping verticals.
And how about all those Shopify (SHOP) stores? They’re everywhere these days.
In other words, our online shopping habits have been democratized. And while Amazon is still growing, it’s growing much less quickly than the likes of Shopify, Wayfair, Etsy, and Chewy. In fact, Amazon’s core e-commerce business is seeing its revenues drop right now. They’ve fallen 4% year over year, as per the company’s second-quarter earnings report.
It’s an incumbent with eroding market share — not great.
Alphabet’s Crumbling Foundation
Moving on to Alphabet, we may have the worst of Big Tech here. It’s the one giant tech company that is most at-risk of meaningful disruption in the coming years.
Google Search is losing ad-dollar market share to visual-heavy platforms like Snapchat and TikTok. That’s because Google Search sells text-based ad real estate, which is significantly less engaging and valuable than visual-based advertising. And visuals are what Snap and TikTok are selling — and most others in the space, for that matter.
Google’s self-driving unit, Waymo, appears to be in shambles. It’s been losing talent left and right over the last year, including the unit’s longtime CEO. I’m hearing murmurs from the self-driving industry that Waymo — once considered the runaway AV leader — is falling behind. And if current trends persist, this company may not be a major player in self-driving once the tech becomes real.
Then you have Google Cloud, which is really losing steam, too. And while the smart home products from Alphabet are cool, that’s not enough to offset slowing growth elsewhere.
Alphabet is in trouble.
Netflix’s Streaming Spiral
Then there’s Netflix. Over the past few months, I’ve heard countless people say something along the lines of, “Netflix isn’t cutting it anymore.”
Two years ago, my friends and I used to talk about all the different Netflix shows to watch. Now we’re talking about the content on Disney+, HBO Max and Peacock.
It’s a whole new world. And in this world, Netflix has a ton of competition and is losing viewership share. They’re even losing users!
I rest my case — Big Tech is dead.
The Final Word on Big Tech
Big Tech companies aren’t going to die overnight. But their dominance will erode, and Big Tech stocks will be dead money for the next few years.
And the catalyst behind this phenomenon is simple. These once untouchable tech giants are losing market share to hungrier, more innovative tech startups.
The investment implication? Forget Big Tech. Buy the tech startups unseating them.
P.S.: The recent volatility in stocks has created a rare event that’s only happened three times in the market’s history. It’s a 1,000% Divergence Window. It won’t be open for much longer. And it presents the perfect opportunity to buy the next Netflix, next Meta, or next Amazon at a massive discount.
The last time a divergence like this occurred, stocks soared hundreds, even thousands of percent. And some saw gains over 10,000%.
Indeed, anyone who caught wind of this event during the savings and loan crisis of 1988, the dot-com crash of 2000, or the housing bubble of 2008 could have made decades’ worth of gains — in five years or less.
But that’s nothing compared to the divergence window that’s open right now. We can confidently say this is the biggest and fastest-moving divergence window in the history of the stock market.
There’s truly no time to waste. This phenomenon won’t mint millionaires for long.
Find out my No. 1 divergence stock to buy today so you can win big in a hurry.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.