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They’re all up over the last year, and some quite considerably.
These companies also have something really spectacular in common: a market cap above $1 trillion.
So even with Apple’s more modest price increase of 7% over the last year, the numbers are huge when you consider Apple is a $2.9 trillion dollar company.
For me, relying on the already proven tech giants has been a more successful path forward in my own investing compared to trying to predict the next big thing.
Because in the world of tech and investing, predicting the next big thing is really hard.
However, identifying what’s already succeeding and jumping on board is substantially less hard.
Here’s the trend I noticed:
Many of the “next big things” were coming from the biggest companies on the planet.
We often talk about innovation or “ground floor” ideas like they’re always generated by little-known companies trading for pennies on the dollar, but that doesn’t seem to be the case nearly as often as the anecdotal stories about breakthrough technology would lead us to believe.
And there are some obvious reasons for that. I’ll start by quickly mentioning a few of those but, ultimately, I want to talk about a different reason for this. One that I believe is often overlooked.
The reason I’ll share is a key driver of my investment decisions, and I believe it plays a significant role in shaping the next decade of the markets.
Let’s begin with the obvious reasons:
Obvious reason #1: They have the best people working on the next thing all the time.
In the most simplified explanation of this point: When you're in a position to have the best and the brightest people working around the clock on what the next leap in technology will be, you have a higher probability of achieving that technological leap than anyone else.
Not only that, but these companies don't necessarily have to originate the idea to claim ownership, leading us to reason #2.
Obvious reason #2: Big companies can simply acquire smaller companies that have the next big thing.
We've seen this time and time again. It's often easier for Facebook to acquire Instagram than to create it (and then compete with Instagram). YouTube is now vying for the number one search engine in the world. That's exactly what Google anticipated when they acquired them.
This will continue to happen because these deals just make so much sense:
Big companies want to fend off competition, continue to innovate and find ways to grow. Small companies want money.
But that’s not the only advantage big companies have…
Obvious reason #3: Big companies have the marketing power to make old ideas work.
If you look at many of the technological “breakthrough successes” since the turn of the century, you’ll see a fairly common denominator: They weren’t actually technological breakthroughs… They were marketing breakthroughs.
There’s no greater example of this than the largest company in the world: Apple Inc.
When iPods came onto the scene, they revolutionized music forever (or at least for a few years until iPhones could do everything iPods could and a million more things).
But when the iPod was released, there were SIX other MP3 players on the market. That didn’t matter much when Apple unleashed its marketing genius though. Within just a few short months, Apple DOMINATED the MP3 market.
Even when Microsoft, another true juggernaut, entered the race, Apple had already taken its victory lap and no one was catching them.
They didn’t invent tablets either, but they DOMINATE the tablet market.
They didn’t invent wireless headphones either, but they DOMINATE the wireless headphone market.
They certainly didn’t invent the smartphone, but they DOMINATE the smartphone market (at least in the US).
The point is, it hasn’t been the innovation breakthroughs that have allowed Apple to take quantum leap after quantum leap in growth. It’s their raving fan base and elite marketing.
They have an uncanny ability to make it seem like they’re bringing something new to the market — and for millions of people to buy in — whether it’s actually new or not.
Obvious Reason #4: They have the research and development budget.
I won’t spend much time on this one because it relates to the first point and it’s pretty self-explanatory.
The fact is, that technology is costly to develop. The more funds you allocate to R&D, the more likely you are to drive innovation.
And in case you’re not sure who spends the most on R&D, it’s exactly who you’d expect.
Now keep in mind, that these numbers are from 2022, so both revenue and R&D spending have grown significantly for some of these companies, ESPECIALLY Nvidia:
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