What’s going on?
Data out over the weekend showed that Big Tech’s been buying up startups at a record pace this year, as the sector tries to fill an insatiable appetite for world domination.
What does this mean?
Big Tech’s had a strong year, with digital life booming as everyone and their dog embraced home-working and online shopping during the height of the pandemic. But that demand has left them scrambling to improve their offerings, and they’ve gone about doing it the only way they know how: by buying big. They’ve spent over $264 billion on companies worth under $1 billion since the start of this year – already double the previous record set during the dotcom boom back in 2000.
Why should I care?
The bigger picture: A deal isn’t a deal.
The US government is wary of all this dealmaking, mind you: it suspects Big Tech is buying out smaller rivals to eliminate its future competition – a move that would limit the public’s choices and could, ultimately, force them to pay more. The government doesn’t sign off on a deal when the company does, either: it’s still looking carefully at Facebook’s years-old acquisitions of WhatsApp and Instagram, and it could still decide to unwind them if it thinks that’s in everyone’s best interests…
For you personally: Growth may be the way to go.
The value of any stock is the value of its future earnings discounted back to today, but those future earnings are worth less when interest rates rise. And since growth stocks – including those of Big Tech – are all about the promise of future earnings, rising interest rates are a big worry for the sector’s investors. Right now, though, interest rates are at rock bottom, and they’re likely to stay that way for the foreseeable future. That might be why Goldman Sachs reckons growth stocks may be the best investment right now.
Originally Posted on September 20, 2021 – Bigger Tech