The Magnificent 7 stocks (Mag 7) are starting to look mediocre. The group, which is made up of Nvidia, Alphabet, Apple, Microsoft, Amazon, Tesla and Meta, has been in the vanguard of the AI boom. Between the beginning of 2023 and the start of this year, the seven US technology mega-caps added $15 trillion in value between them and grew to account for a third of the entire S&P 500 by market capitalisation, say Emily Herbert and Tim Bradshaw in the Financial Times. Yet over the past month, they have collectively lost $2.2 trillion in value. Many of these firms are “hyperscalers”, with plans to lavish about $1 trillion on AI data centres. Investors are increasingly sceptical about whether such huge sums will ever generate a meaningful return.

Microsoft's and Meta's shares are in a “bear market”, having fallen more than a fifth from their peak, says David Goldman on CNN. The others are down at least 10%. There are growing signs of nervousness about technology valuations. The Nasdaq index fell every day last week. Korea's Kospi, which plays host to some major AI plays, has been on a wild ride this year, including another 10% plunge on 23 June.

Magnificent 7 stocks decline, but semiconductors soar

Yet while the Magnificent 7 stocks are falling out of favour, a boom in the firms selling computer chips to them at eye-watering prices has “more than made up the difference”. Micron's shares have gained 265% this year, Samsung is up 144%, and Intel has surged 254%. The semiconductor industry alone now accounts for 19% of the S&P 500's market value. The iShares Semiconductor exchange-traded fund (ETF) rocketed a staggering 110% in the first half of the year, says Ines Ferre for Yahoo Finance.

That pushed the US technology sector to its best first-half performance in three years, the slump in the Magnificent 7 stocks notwithstanding. AI data centres require specialised computer kit, but there is now an acute shortage and “it takes years to build new production facilities” for chips, says James Mackintosh in The Wall Street Journal. The result has been soaring prices: Micron's have “quadrupled” in the past year. Consumers have been caught in the crossfire, with Apple hiking prices for its computers. The net effect is “an enormous transfer of cash” from the AI hyperscalers to memory-chip makers. The problem for the AI industry is that firms such as ChatGPT-maker OpenAI were already loss-making (venture capital has been subsidising an expensive grab for market share). Now the maths looks even more challenging for the businesses that started the AI boom.

In retrospect, the best thing to do over the past six months would have been to go long chip stocks while shorting software firms, says John Authers on Bloomberg. Korea's chip-dominated Kospi stock market index has almost doubled since 1 January, while the S&P 1500 software index is down 17.5%. US technology-related capital expenditure is now slightly above the 5% of GDP peak it reached in 2000 during the dotcom bubble. By attracting “more capital than they can productively use”, investment bubbles ultimately “sow the seeds of their own destruction”.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Orbex was certainly ambitious. It was one of two companies backed by the British government with plans to develop a domestic space industry.

At its peak in 2022, the business was valued at $220 million. It planned to create a commercial rocket that would be launched from its base in Scotland.

If it could have made it work, and brought it to completion on budget, it could potentially have been one of the leaders of the European space industry.

But last week the government decided not to take part in the latest funding round, despite putting in £26 million in two earlier rounds, and the company had no choice but to call in the administrators.

It is not the first space project backed by the British government to fail. An earlier investment in OneWeb, a satellite start-up to rival Starlink, was made under Boris Johnson’s government.

But that also came to nothing and it had to be merged into France’s Eutelsat. It is not an inspiring record. The government keeps pumping money into research and development, only to watch its investments fail.

The space industry is throwing up some serous opportunities

Yet space is turning into one of the most important industries of the 21st century. The global space industry is already worth an estimated £500 billion a year and it is growing all the time. Elon Musk’s SpaceX is expected to list its shares later this year with a value of $1 trillion or more.

Rivals such as Amazon founder Jeff Bezos’s Blue Origin are growing just as quickly.

From internet connections, to orbital data centres, to mining for raw materials, lots of commercial applications are opening up. It has become clear that space is a serious commercial opportunity, and one where lots of money will be made.

Britain should want to be a part of that. The UK economy is hardly in great shape, but if it is to start growing again then it needs to find a way of building new, high-tech industries that generate plenty of wealth and well-paid, high-skill jobs.

Space is a perfect candidate, especially considering we have a deep heritage in aerospace and engineering, and that we also have the venture-capital firms to back them once they become established. There should be plenty of British entrepreneurs building new companies in the sector.

Yet we have taken completely the wrong approach. We are relying on the traditional policy of state-led investment, even though it has failed countless times in the past.

The government tries to identify a company with a promising technology and gives it a little bit of money, then everyone crosses their fingers and hopes it turns into a success, or at least manages to find a buyer with deeper pockets. More often than not, it doesn’t work. The “winner” turns out not to be very good after all, the technology doesn’t quite work as planned, the schedule slips and the government loses interest. The start-up closes or is sold off. Rinse and repeat.

Britain should do something different. We should radically deregulate to allow innovation. Of course, the industry needs proper safety standards. Nobody wants to see rockets blowing up on the launch pad, especially if it risks lives.

But there is still plenty we could be doing to make the UK the most competitive country in the world to start and build a space company.

Put a rocket under Britain's space industry

To start with, we could make space profits free of corporation tax. If Britain had a zero rate for operations off-planet, that would be very attractive for firms around the world. Next, offer a 10% capital gains tax rate if a space business is listed or sold.

Again, that would make the UK the world’s best place to invest in new space businesses.

Finally, relax the technical regulations. The industry is inherently risky. SpaceX has suffered an explosion, but that has not stopped it from growing. If there are no humans on board, it does not really matter if a spacecraft does not work quite as planned.

We should recognise that we can’t apply the same standards we would to a car or a toaster, and relax the rules accordingly.

It is the one sector where it will pay to be a little less cautious. Let entrepreneurs experiment with what works and what doesn’t. That’s the way the UK could become a world leader in the space industry.

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What is enshittification?

“Enshittification” is a term coined by the British-Canadian technology critic and author Cory Doctorow in 2022 to describe how the digital services that increasingly dominate our lives – Meta, Amazon, Alphabet and the rest – all turned to crud at the same time. Not everyone is as comfortable with vulgarity as Doctorow. When speaking about the phenomenon in public forums, the author plumps for “enpoopification”, employing a more decorous euphemism – poop – that dates from the mid-18th century. Here, though, we ask readers to tolerate a word that has been in continuous usage in England for about a millennium and which has only been considered rude for the past four centuries or so. “Sometimes a term is so apt, its meaning so clear and so relevant to our circumstances, that it becomes more than just a useful buzzword and grows to define an entire moment,” said Kyle Chayka in The New Yorker. Enshittification is the only word that does justice to what is going on.

What are some examples of enshittification?

This (Generation X) MoneyWeek writer no longer chats pleasurably with old university friends on Facebook because the platform has become so unashamedly crap. Ten years ago, a Facebook feed was made up of friends’ news, views and recommended articles. Now it’s an incomprehensible cesspit of advertisements and pathetic videos. For a while, you wondered if it was just you suffering. Then you realise it’s everybody. That’s enshittification. Or remember when Twitter gave you instant access to your own curated pick of the best journalism, insight and a “livestream feed of smart people on the ground at the most pressing events of the day, not to mention the wisecracks and insights of your friends”? Now, says Charles Barbour on The Conversation, it’s rammed with “ads, gore, porn, toxicity, AI slop and scams of all variety”. That, too, is enshittification. “Facebook, Instagram, TikTok, Amazon, Google, Apple, Uber, Spotify: everything turns to shit. And no one is able to escape.”

Will switching digital platforms stop the enshittification?

That won’t necessarily help. Enshittification is not the result of a business failure that risks driving customers to other platforms. It’s about intentionally letting your platform get crappier once customers are locked in, whether by their own commercial imperatives or by network effects. Enshittification is a strategy, not an accident. In Doctorow’s conception – in numerous essays and laid out more fully in his recent book Enshittification: Why Everything Suddenly Got Worse and What to Do About It – the process of enshittification has three distinct phases. At first, products are great for end users: they let old chums reconnect for free, say, with no surveillance and no “boosted” slop. Next, they abuse those end users to benefit their business customers. They find ways to lock end users in – switching costs, network effects, contracts, digital rights management – and once users are stuck, the company makes the product worse for them to extract more value.

What's the third stage of enshittification?

Finally, platforms use their surpluses to woo business customers (advertisers, sellers, creators), lock them in and start making the product worse for the business side, too. This is the highest form of enshittification: when platforms abuse their business customers, and a lack of meaningful competition and regulation means they can still increase profits. The defining feature of the process is not “things got worse”: it’s “things got worse and we stayed”. For example, in 2019, Google had a 90% market share in search, but growth had stalled, so a strategy was pitched to make search worse so that users would have to run multiple queries and see more advertisements. “That’s enshittification in a nutshell – and we all kept using Google anyway.”

Is this a sustainable model for companies?

The assumption that enshittified companies are doomed to die may be optimistic, says Henry Mance in the Financial Times. Today on Amazon, the top search results are more expensive and sometimes fraudulent. The product you want is, on average, 17th in the results – yet Amazon is thriving. Apple surveils its users as much as Facebook, and refuses to let companies sell refurbished iPhone parts. It lured customers “into its walled garden, which was then revealed to be a prison”, says Doctorow. Now, car firms such as Tesla charge drivers monthly subscriptions for features they have already bought. Indeed, Doctorow’s concept is so “brilliant” it should be applied more broadly, says Paul Krugman in his blog on Substack – a platform that recently pulled off a fundraising round that valued it at $1.1billion, raising fears about its own future path. The logic of enshittification “applies to any business characterised by network effects. It may go under different names such as ‘penetration pricing’, but the logic is the same.” Others go even further, positing Donald Trump, for example, as the “enshittifier-in-chief” of US politics.

Is there a way to combat enshittification?

Doctorow’s book is less convincing on solutions than on entertainingly setting out the problems. But the combination of Trump’s tariffs (undercutting US trade threats) and Brexit (restoring regulatory autonomy) provides a striking opportunity to gain back control of our digital lives, Doctorow argues in The Guardian. Outside the EU, Britain could choose to legalise reverse-engineering for interoperability and user benefit, thus allowing UK firms to modify and improve US tech products, and undercut the rent-extraction models of US platforms. Such a move would attract talent and capital spooked by Trump, reclaim digital sovereignty, and build a profitable tech sector focused on “disenshittifying” platforms. The opportunity is narrow and fraught with political and economic risk. But, says Doctorow, it is “the most exciting proposition in decades”.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Summary

• Microsoft (NASDAQ:MSFT) and Meta’s (NASDAQ:META) shares both jumped after impressive earnings beats
• Meta's stock gained 12% overnight after announcing a 38% year-on-year earnings increase
• Microsoft shares surged almost 9% after announcing 24% year-on-year increase in earnings
• Those gains are enough to push Microsoft's stock to a $4 trillion+ valuation
• Wedbush Securities raised Meta share price target to $920 from $750
• Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) both posted earnings beats
• Apple stock gained 2% overnight as China sales grew 4%
• Amazon's share price fell over 7% as AWS growth lags that of rivals GCP and Azure

| Microsoft and OpenAI | AI ETFs | Apple shares |

Microsoft and Meta kick off big week of results

Good afternoon, and thanks for joining our live coverage in the run-up to Microsoft and Meta’s results tomorrow evening, followed by Amazon and Apple’s on Thursday.

Microsoft’s share price movements are the subject of intense interest on Wall Street, as the company’s market capitalisation (market cap) nears the $4 trillion threshold Nvidia became the first company to break earlier this month.

A bumper earnings release on Wednesday could send Microsoft’s shares soaring. Will it be enough to join Nvidia?

Magnificent Seven earnings season is in full swing. Follow here for rolling previews, analysis, updates and reaction.

Microsoft and Meta shares gaining ground ahead of results

Markets have been open for around twenty minutes today, and as things stand Microsoft shares are up around 0.7%, while Meta’s stock has fallen 0.2%.

During yesterday’s session, Meta’s shares gained a boost from market optimism over a US-EU trade deal, gaining 0.69%. Microsoft’s stock was 0.25% up at one point, but closed the session down 0.24%.

When do Microsoft and Meta announce their results?

Both Microsoft and Meta will announce their results this Wednesday (30 July) after US markets close. That means after 9pm UK time.

Meta’s earnings call is scheduled to start at 2pm PT, which is 10pm in the UK. Microsoft’s is scheduled to start half an hour later, at 10.30pm in the UK.

Results will be released in between the close of markets and the start of the respective earnings calls – generally, soon after markets close.

Microsoft and Meta’s shares will continue to be traded during this period in what is known as after-hours trading.

What do analysts expect from Meta and Microsoft’s results?

Analysts polled by FactSet and LSEG have the following expectations for Meta and Microsoft’s results this week:

The FactSet estimates see Meta’s revenue increasing 14.7% and earnings rising by 14.0% year-on-year.

Microsoft, meanwhile, is expected to grow revenue by 14.0% and earnings by 14.6%.

Microsoft earnings preview

Besides the headline numbers, analysts and investors will be keeping a close eye on Microsoft’s cloud revenue platform, Azure.

Azure is one of the top three cloud service platforms, alongside Magnificent Seven rivals Amazon Web Services (AWS) and Google Cloud. Cloud services like these are getting a boost from the compute demands of artificial intelligence (AI) training.

“We strongly view this as Microsoft’s ‘shining moment’ with AI set to change the cloud growth trajectory,” says Dan Ives, global head of technology research at Wedbush Securities.

Like Google, Microsoft has its own AI model, Copilot. A theme for this week’s results could be analysts watching for signs of return on these AI investments.

“Adoption [of Copilot] has been picking up, and investors want to know whether it's boosting revenue in a meaningful way,” says Lale Akoner, global market analyst at eToro. “Microsoft is spending heavily to build more AI infrastructure, so profit margins will be closely watched.”

Meta earnings preview

Like Microsoft, investors will want to see evidence that Meta’s extensive investments into AI, especially its Llama model, are yielding results.

“So far, markets have rewarded the company’s massive capex pivot, driven by custom silicon, Llama models, and expanding infrastructure, but now it’s “show me the money” time, says Lale Akoner, global market analyst at eToro.

“Reality Labs losses remain a sore spot, but are tolerable if core earnings impress,” adds Akoner. “User growth and ad pricing trends, especially outside the US, will be scrutinised closely given recent dollar strength and macro wobble in emerging markets.”

Thanks for following our reporting ahead of Microsoft and Meta's earnings. Join us again tomorrow for a full day of preview and analysis, followed by Amazon and Apple's on Thursday.

Meta stock falls and Microsoft trades flat ahead of earnings

Good morning, and welcome back to our live coverage ahead of Microsoft and Meta’s results.

Microsoft shares closed yesterday’s session just 0.01% above the previous session’s close.

Meta’s share price, meanwhile, fell 2.46% in regular trading, though some of these losses were recovered after hours.

Expect to see lots of movement in both Microsoft and Meta’s stock this evening as both companies announce their results for the most recent quarter.

When do Apple and Amazon announce their results?

Apple and Amazon will both announce their latest results tomorrow (31 July), after markets close in the US.

The results will land in between markets closing and the start of each company’s earnings call, both of which are scheduled for 2pm Pacific time (10pm BST).

During after-hours trading, both Apple and Amazon’s stock is likely to be highly volatile. Share price movements will depend initially on the reaction to how the raw numbers compare to the expectations of analysts (we’ll bring you more on those later today), as well as how each company’s management discusses them during the earnings calls.

Why the Mag7 still matter

In case investors are wondering why changes in Microsoft or Meta’s share price should interest them, it is worth remembering that the Magnificent Seven group has been outperforming the broader market for over a decade.

“It really has been a case of investors needing to keep up exposure to these companies to enhance portfolio returns,” says Daniel Casali, chief investment strategist at Evelyn Partners.

The roots of this outperformance goes back to the rise of the internet during the 1990s, mobile data in the early 2000s, and the cloud computing revolution from 2006 onwards.

“In 2025 this is reflected in their earnings forecasts,” says Casali. “For the second quarter, they are expected to post an aggregate annual earnings increase of 14%.”

Data from FactSet suggests that the S&P 500 as a whole has, by contrast, posted average year-on-year earnings growth of under 6% so far this earnings season.

When it comes to the Magnificent Seven, “their financial leadership is not just a matter of trend: it’s a structural advantage,” says Casali.

Meta’s AI spend in focus

Meta’s share price has made solid gains this year as the company is, currently, viewed as one of the winners of the AI boom. It has been successful in incorporating AI into its ad business, for example, boosting targeting, engagement and efficiency.

However, the company is spending big on developing its own AI models, and that could lead to some investor pessimism if it isn’t able to demonstrate results.

“Meta’s had some disappointing progress on its open-source language models, and it’s opening the chequebook to put things right,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown. “The creation of a new ‘superintelligence lab’ has caused quite the stir, with Meta rumoured to be dangling $100 million+ packages to poach AI talent.”

Last week, Alphabet shares fell immediately after it released its results despite strong headline numbers, with investors alarmed at its increased capital spend projections for this year.

Could we see a similar reaction in Meta’s share price this evening?

Microsoft shares are a favourite among fund managers

Microsoft’s stock has a dominant share of overall fund exposure compared to the rest of the Magnificent Seven, according to data from Morningstar, suggesting that it is a favourite of institutional investors.

Despite having been overtaken by Nvidia as the world’s most valuable company, it still edges the semiconductor giant out of top spot in terms of institutional fund holdings.

“Institutional confidence remains strong, driven by Azure’s 30% growth, deep enterprise ties, and its leading position in AI through OpenAI,” says Monika Calay, director of UK manager research at Morningstar.

Microsoft’s share of the top fund holdings has fallen by just 0.41% over the past ten years – and it has demonstrated greater consistency than any other Magnificent Seven stock during that time.

“Microsoft is the only member of the Magnificent 7 to consistently hold at least a 20% average weight in global equity portfolios every year for the past decade, a testament to its enduring institutional appeal,” Calay adds.

Apple and Amazon results: what the analysts expect

Analysts polled by FactSet and LSEG have the following expectations for Apple and Amazon’s results tomorrow:

The FactSet forecasts, if accurate, envisage Amazon’s revenue increasing 9.5% and its earnings rising by 5.6% year-on-year. For Apple, they predict a 3.9% increase in revenue and a 1.4% rise in earnings.

Meta and Microsoft shares swing during final session before earnings

We’re about one hour into the final trading session before Meta and Microsoft announce their results.

Meta’s stock opened 1.1% higher today, but it has fluctuated through the first hour of trading, currently sitting around 0.5% above yesterday’s close.

Microsoft’s share price opened 0.6% higher than yesterday’s close, but has lost much of those gains in the meantime.

Recap: Microsoft and Meta results expectations

Analysts polled by FactSet and LSEG have the following expectations for Meta and Microsoft’s results tonight:

Meta and Microsoft shares will likely make their first moves based on their performance against these headline figures, as well as other relevant factors included in their earnings release, like capex expectations and forward guidance.

We’ve seen before, though, that management comments during the earnings calls can have a big impact on share price movements. The sentiment for both Microsoft and Meta’s stock will depend heavily on whether they can convince investors that they are winning the AI war.

Microsoft results: Azure growth in focus

Microsoft shares are still struggling to make gains during this session, up just 0.14% three hours into trading.

Could strong growth in Azure - Microsoft's cloud platform - give Microsoft stock a boost this evening?

"Cloud performance through Azure was stronger than expected last quarter, and there could be some upside to guidance of 34-35% growth," says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Dan Ives, head of global technology research at Wedbush Securities, also believes that Azure's growth could take the market by surprise.

"We believe the stock still has yet to price in what we view as the next wave of cloud and AI growth," says Ives. "We view MSFT as the clear front-runner on the enterprise hyper scale AI front, despite increasing competition from Amazon's AWS and Google's GCP."

We're going to take a pause in reporting for now. Join us back here at 9pm for live coverage of Microsoft and Meta's earnings releases.

Breaking: Microsoft stock surges on earnings beat

Microsoft's share price has gained over 7% since close of trading.

Earnings per share increased 24% year-on-year to $3.65, and revenue increased 18% to $76.4 billion.

Azure revenue increased 34% year-on-year to $75 billion.

BREAKING: Meta stock up over 9% as earnings soar

Meta's stock, meanwhile, has surged 9.1% in after-hours trading on a bumper earnings beat.

Revenue increased 22% year-on-year to $47.5 billion and earnings per share rose 38% to $7.14 - smashing through the ~$5.90 that analysts had expected.

Concerns over Meta's profits following its AI investments seem misplaced now...

Microsoft's "slam-dunk quarter"

A few more highlights from this earnings beat that has seen Microsoft's stock surge over 7%:

• Intelligent Cloud revenue of $29.88 billion, ahead of an expected $28.92 billion.
• Gross margin of 68.6% beat an expected 68.0%; operating margin of 44.9% beat the expected 43.6%.
• Net income increased 24% year-on-year to $27.2 billion.

"This was a slam-dunk quarter for MSFT with cloud and AI driving significant business transformation," said Dan Ives, global head of technology research at Wedbush Securities. "We believe Microsoft is just hitting its next phase of monetisation on the AI front and more enterprises are accelerating their AI budgets," he added.

Meta's capex will keep growing next year

Meanwhile Meta's stock is still climbing, now up almost 9.5% since those results dropped.

"Meta has knocked it out of the park," says Matt Britzman, senior equity analyst at Hargreaves Lansdown. "AI is clearly delivering real-world benefits for advertisers, and they’re willing to pay more as a result. Average price per ad was up 9% over the quarter, a clear indication that Meta is delivering an improved product for both users and advertisers."

Capital spend is likely to increase $30 billion in the full year 2025, and CFO Susan Li signposted a similar rate of capex growth next year.

That may have taken analysts by surprise, but the market doesn't seem to mind. With the previous investments yielding such strong returns already, big spending seems to be going down well, and Meta shares are climbing.

We're going to end coverage here for this evening, but we'll be back tomorrow with more reaction and analysis for these eye-catching results, as well as a digest of what Meta and Microsoft's management says during their upcoming earnings calls.

Microsoft to enter $4 trillion club?

Good morning, and welcome back to our live coverage of tech earnings season. We’ll be digesting those huge earnings beats from Microsoft and Meta as today goes through.

Meta’s stock has gained 12% in out-of-hours trading since it reported a 22% revenue rise and a massive 38% increase in earnings.

Meanwhile, Microsoft looks set to join Nvidia in the $4 trillion market cap club when regular trading opens today. Microsoft stock has gained 8.7% overnight, following a 24% year-on-year increase in its earnings. Its market cap at close yesterday was $3.81 trillion – so closing today’s session with share price gains of anything over 5% from yesterday’s close will be more than enough to make Microsoft the world’s second $4 trillion company.

End of the AI profitability debate

There have been questions over the last two years as to whether or not the money that the Magnificent Seven hyperscalers are pouring into AI will deliver results.

That debate seems to be over.

"Meta and Microsoft turned over a new chapter in the AI story last night," says Matt Britzman, senior equity analyst at Hargreaves Lansdown. "Both companies crushed it, with debates around whether AI is delivering tangible returns starting to fade into history."

Meta’s stock surges on Superintelligence optimism

There was speculation ahead of Meta’s earnings release that investors would be put off by the big spending that the company is pouring into its Superintelligence Lab. But in the event, the vision of a superintelligent future painted during the earnings call saw Meta’s share price surge.

CEO Mark Zuckerberg led with optimism over the lab and its potential early in the investor call.

“Developing superintelligence, which we define as AI that surpasses human intelligence in every way, we think, is now in sight,” said Zuckerberg at the start of his prepared remarks.

“To build this future, we've established Meta Superintelligence Labs, which includes our foundations, product and FAIR teams as well as a new lab that is focused on developing the next generation of our models.”

Zuckerberg said that AI-infused smart glasses, such as those it has developed with Ray-Ban and a new range it is launching with Oakley, will be the main way that superintelligence is integrated into people’s daily lives.

He explained that one of the biggest technological hurdles that needs to be overcome in building AI that is more intelligent than humans is to build software that can train itself.

“We’ve begun to see glimpses of our AI systems improving themselves,” he said, adding that the progress was “slow for now”.

BREAKING: Wedbush raises Meta share price target

Influential investment bank Wedbush Securities has raised its 12-month price target for Meta from $750 to $920.

Based on where Meta's stock closed regular trading yesterday, that implies 32.3% in share price gains over the next year.

"We believe the recent level of investment is justified, and the infusion of AI capabilities across the company's ad stack and content recommendation engines are driving tangible results for Meta's Family of Apps and Reality Labs," said Scott Devitt, managing director, Equity Research at Wedbush Securities.

Recap: when do Amazon and Apple announce results?

With Microsoft and Meta's stock surging after their earnings beats is easy to forget we've got two more Magnificent Seven companies announcing results tonight.

Here's a recap of those timings:

eToro: Microsoft stock offers "perfect mix" to investors

It’s quite hard to overstate how impressive the double beat from Microsoft and Meta was last night.

Microsoft in particular hit all the right notes for a stock that looks set to break $4 trillion in market cap.

“Microsoft is investing heavily to build AI infrastructure, though it seems to be working,” says Lale Akoner, global market analyst at eToro. “Margins are holding up, and the business is seeing real demand, not just hype.”

Akoner believes that investing in Microsoft is one of the best ways to ride the AI wave long term.

“For retail investors, this is a perfect mix of a tech giant growing fast, spending smart and actually delivering on their AI promise,” she says.

Amazon stock on a high heading into earnings

Amazon’s share price looks set to catch some of the positive fallout from Microsoft’s big earnings beat yesterday. Amazon stock is up 2.6% in pre-market trading five minutes before US markets open.

With Azure revenue growing 39%, investors seem to be positioning themselves for the possibility of AWS following suit.

Scott Devitt, managing director, Equity Research at Wedbush Securities, expects AWS revenue to increase by 16% year-on-year in these results. That figure would put AWS revenue on approximately the $30.5 billion mark.

“AWS commentary was encouraging last quarter, highlighting the strength of AI demand,” Devitt said in a research note. He also highlighted that AWS management had said that AWS growth would have been higher in Q1 were it not for near-term capacity constraints.

BREAKING: Microsoft stock opens session at $4 trillion+ market cap

US markets have opened and Microsoft's share price has opened 8.2% above yesterday's close, more than enough to tip its market cap above $4 trillion during regular trading for the first time in its history.

Can Meta stock stay higher for longer?

Meta’s share price has also sustained its overnight gains, opening today’s session up 11.6% following its stellar results last night.

“Meta reported a blow-out quarter, meaningfully eclipsing both Street and Buyside estimates for 2Q revenue and the 3Q guide,” said Benjamin Black, co-head of Internet Equity Research at Deutsche Bank in a research note.

Black drew attention to Meta alleviating fears that its capex might be getting out of control.

“Perhaps just as importantly, the high ends of both FY25 operating expenses and capex guidance were maintained, while the lower ends were both modestly increased, which is meaningfully better than feared,” he said.

Big spending is perhaps the only cause for concern with Meta’s stock at present.

“Meta is planning to spend a lot more, possibly over $100 billion next year on AI and infrastructure. That’s a huge bet and while it could pay off long term, it adds real risk in our opinion,” says Lale Akoner, global market analyst at eToro.

“Meta stock jumped after earnings, but it’s had sharp ups and downs lately. Investors are still trying to figure out if all this spending will drive future profits, or just higher costs,” she added.

Apple’s share price has fallen 16.5% in the year to date. Apple used to be the world’s most valuable company, but at the moment it is languishing.

Macro conditions haven’t helped. Trump’s tariffs pose a particular threat to the company given how reliant its supply chain is on components manufactured overseas – particularly in China. Apple’s management has already flagged a $900 million hit to its profits as a result of tariffs.

But this is compounded by mounting disappointment on its progress in AI, which has “fallen well short of what investors and consumers have come to expect from one of the world's leading brands”, says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

“Apple Intelligence has so far failed to deliver the game changing experience that was promised, so investors should watch out for any updates on new AI features,” Britzman adds. He also believes that tariff impacts are likely to come under scrutiny during this evening’s earnings call.

Apple and Amazon shares steady heading into results

Apple shares are trading flat today, while Amazon stock is up 1.7%, in their final trading session ahead of results.

On paper, analysts polled by FactSet expect the following figures from each company:

While these numbers could impact Amazon and Apple’s share price moves in after-hours trading, there is also likely to be a strong focus on deeper metrics.

In Amazon’s case, that will be growth of its cloud division, AWS. Microsoft set the bar high on that front last night, with its Azure division posting 39% revenue growth.

Apple, meanwhile, will need to demonstrate to the market that it is not being left behind in the AI race. Again – both Meta and Microsoft have demonstrated that spending big on AI is already delivering profits. Apple will need to convince the market that it is prepared to be bold in this race.

Our coverage is going to pause here for now, but we will be back after these results have been posted to bring you the headlines and all the reaction.

Apple shares rise after encouraging results

Good morning, and welcome back to our live coverage of big tech earnings season.

Apple shares have gained 2% overnight, following the company’s latest earnings release which revealed a return to positive growth territory in China, a key market for Apple.

Revenue of $94.0 billion represented 10% year-on-year growth and a record for Apple’s June quarter. Diluted earnings per share (EPS) were up 12% on last year to $1.57. Analysts had forecast revenue of $89.2 billion and EPS of $1.43.

“This was a major step in the right direction for [Apple CEO Tim] Cook and Cupertino with China the star of the show,” said Dan Ives, global head of technology research at Wedbush Securities.

“Now it's time to address the elephant in the room: the AI strategy which remains absent while the rest of the tech world is laser focused on the AI Revolution,” he added.

Amazon stock falls despite earnings beat

Amazon delivered an earnings beat – $1.68 compared to $1.33 expected – but its share price has fallen by more than 7% since the close of trading yesterday.

Revenue increased by 13% year-on-year to $167.7 billion, well ahead of the $162.2 billion that analysts had forecast.

AWS revenue rose 17.5% to $30.9 billion. In isolation, that’s not a terrible result – but compared to the momentum that Google’s GCP and, in particular, Microsoft’s Azure have demonstrated, investors are clearly concerned that AWS is being caught by its rivals.

“The spotlight was firmly on AWS, and it didn’t quite shine as brightly as expected,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

“While Microsoft and Alphabet have already shown strong momentum in cloud growth, AWS wasn’t the knockout many wanted to see, highlighting just how tightly investor sentiment is tied to the AI narrative right now.”

AI pessimism dampens reaction to Apple’s results

The 2% overnight gain for Apple’s shares is a fairly modest response to what is on paper one of the strongest sets of results in recent years.

iPhone sales grew 13% year-on-year, as did Apple’s Services division.

Investors, though, are clearly still underwhelmed by Apple’s progress on AI.

“We believe our platforms offer the best way for users to experience the full potential of generative AI,” said CEO Tim Cook during the earnings call that followed Apple’s results.

But the market isn’t convinced.

“Apple should be a leading name in AI hardware, but that’s simply not the case,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Apple Intelligence was a flop, so a lot of hope now lies in an AI-powered Siri – but that might not come until next year.

“Brand loyalty gives Apple time to get the AI transition right, but it needs to start delivering,” adds Britzman.

Thank you for following

Thanks for following our coverage of Meta, Microsoft, Amazon and Apple's results.

We're going to wrap up our live reporting here. But we will keep breaking down the latest round of results and their implications for the market over the coming days, so keep checking MoneyWeek for the latest news on tech stocks.

We'll also bring you live coverage of Nvidia's results at the end of August. With cloud revenue booming and AI capex booming in Magnificent Seven results season so far, will it be another bumper set of results for the semiconductor giant?

Summary

• Alphabet announced earnings per share (EPS) of $2.31 and revenue of $96.4 billion, beating analyst estimates
• Tesla’s results showed EPS of $0.40 and revenue of $22.50 billion, down year-over-year, but in line with analyst estimates
• Tesla shares fell over 4.6% during the earnings call
• Five other Magnificent Seven companies announce earnings next week. Nvidia announces at the end of August

The MoneyWeek team is bringing you rolling previews and analysis, along with live coverage and reaction. Keep following for the latest.

| Magnificent Seven latest | Invest in Tesla? | S&P 500 | AI ETFs |

Good morning, and welcome to our live coverage of another big tech earnings season.

Two of the industry’s heavy hitters – Netflix (NASDAQ:NFLX) and Taiwan Semiconductor Manufacturing Company (NYSE:TSM) – got things underway last week, but big tech earnings season truly kicks into gear this week, as the first two of the Magnificent Seven companies announce their results on Wednesday.

Alphabet’s earnings release will be an intriguing glimpse into how the company is navigating the choppy waters that artificial intelligence poses. Is its core Search business holding up in the face of increased AI competition? If not, can growth of its Google Cloud service make up for any shortfall?

Then there is Tesla. Once again, quarterly delivery numbers have disappointed, calling Musk’s much-publicised political activity into question. But Tesla is now a robotics company – didn’t you know? – so updates on this month’s robotaxi launch will be the focus of attention at Tesla’s earnings call.

We will bring you rolling updates, preview and analysis, throughout this week and next.

When are Alphabet’s and Tesla’s earnings releases?

Both Alphabet and Tesla announce earnings after US markets close on Wednesday 23 July.

Alphabet’s earnings call is scheduled for 1.30pm Pacific Time (9.30pm in the UK), half an hour after US markets close. Its earnings will likely be published online during that window.

Tesla’s earnings call is scheduled to start at 4.30pm central time – 10.30pm in the UK, so one hour later than Alphabet’s.

TSMC results paint upbeat picture for big tech earnings

Taiwan Semiconductor Manufacturing Company – often referred to as TSMC for short – is rarely included in any of the big tech groupings, and isn’t anything like as much of a household name, but that is perhaps unfair.

In a nutshell, it is the world’s most advanced manufacturer of computer chips. Nvidia, which is the best-known semiconductor company in the world, doesn’t actually build any of its chips. TSMC does. It also builds chips for Apple, Arm, Qualcomm, AMD and Broadcom.

TSMC announced a 61% increase in profits last week, with revenue rising 39%. Yesterday, the company joined several of its high-profile customers in the $1 trillion market cap club.

Given that it builds the hardware that the rest of the tech industry depends on, TSMC’s success is a good bellwether for the health of the sector.

Netflix shares fall despite earnings beat

Streaming giant Netflix also posted its results last week. Shares fell in after-hours trading following the announcement, despite an earnings beat, exemplifying the weight of expectation that big tech companies are under at present.

Netflix was once numbered among the world’s most prominent big tech stocks during the ‘FAANG’ (Facebook, Amazon, Apple, Netflix and Google) era. Now, with a market cap around $520 billion, it is no longer in the upper echelons of big tech stocks, analysts, if not the market as a whole, were impressed with its 16% year-on-year revenue growth, and 47% increase in earnings.

“Netflix continues to produce phenomenal results with ever more growth in its sights,” said Alicia Reese, SVP Media & Entertainment equity research at Wedbush Securities. “Even as investor expectations were high heading into the print, and shares reflected some disappointment in the size of the beat and raise, the quality of the beat and raise keeps us positive as we assess the ongoing expansion of Netflix’s free cash flow.”

See our explainer on the results and subsequent Netflix shares reaction for more detail.

S&P 500 earnings strong so far

TSMC and Netflix are two of the highest-profile tech companies to have beaten earnings estimates so far, but it’s a trend that is playing out across the S&P 500.

Around 60 of the biggest 500 US companies have declared Q2 results so far. Of those, more than 80% have beaten expectations.

“That’s not unusual,” says Tom Stevenson, investment director at Fidelity International. “Companies tend to massage forecasts lower in the run up to results season.

“But it does suggest that earnings growth will continue at around the long-run average of 7%,” he adds.

Of course, with their high valuations, most of the Magnificent Seven stocks are expected to grow their earnings above this rate. Will they deliver?

Alphabet earnings: the watch-outs

Let’s take a closer look at the big tech earnings releases coming up this week, starting with Google’s parent company Alphabet.

Market sentiment towards Alphabet has dimmed in recent months. It is the cheapest of all the Magnificent Seven companies relative to past and projected earnings, trading at 21.22 times trailing earnings and 20.46 times projected earnings – below the S&P 500’s average on both fronts.

The fact that those two figures are so close to each other highlights part of the problem: analysts do not see Alphabet’s earnings growing significantly in the near future.

Many fear that generative AI could cut into demand for Google’s core Search business.

“New competition from language models like ChatGPT [is] a genuine threat,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Alphabet has a quality lineup of businesses, but its long-standing crown as the entry point to the internet is under pressure, and that’s put the valuation under strain.”

There is also the possibility that regulators could force a breakup of Google’s business, with two antitrust cases having found that the company operates an illegal monopoly over internet search over the last year.

“Calls for a forced Chrome divestment could challenge Alphabet’s search dominance, and that will keep some investors cautious until there’s more clarity,” said Josh Gilbert, market analyst at eToro.

Google has said it will appeal the decisions, but with Search lying at the heart of Google, any updates will be closely monitored on Alphabet’s earnings call on Wednesday.

Alphabet earnings: the tailwinds

While generative AI poses a threat to Alphabet’s business, it also offers opportunities, and investors will watch out for these keenly at the earnings call tomorrow.

For one thing, AI demand is driving growth of Google Cloud, with analysts projecting top-line cloud revenue growth of around 26-27%.

“Alphabet is continuing to invest heavily in Gemini, its flagship AI assistant, as well as AI-powered ad products and enterprise tools,” says Josh Gilbert, market analyst at eToro. “With growing investor interest in monetisable AI applications, updates on Gemini’s integration into Search, Workspace and Cloud could be a key focus this quarter.”

Capital expenditure is likely to rise, but the market won’t necessarily regard that as a negative given the arms race that big tech companies are engaged in over AI.

“In this environment, it’s spend or get left behind,” says Gilbert.

Tesla earnings: under-delivery becoming a habit

Tesla’s earnings will be released under a cloud: delivery numbers fell year-on-year for the second consecutive quarter. The company announced a total of 384,122 deliveries for the quarter on 2 July.

Shares in Tesla actually rose by 4% following the announcement, but fell 8.4% on 7 July. Tesla shares have fallen nearly 20% this year, as the relationship between CEO Elon Musk and president Donald Trump has soured.

“Elon’s position as a Tony Stark-like personality at the head of the company was a boon for a long time, but it’s hard to argue that his prominence isn’t having some detrimental effect on the brand,” says Josh Gilbert, market analyst at eToro. Read more on Musk’s changing relationship with Tesla here: Who’s driving Tesla?

Cybertruck sales have also continued to decline, having hit their lowest level in a year during the last quarter.

Fairly poor financial results can be almost baked-in for Tesla, barring any major cost-cutting achievements. As is often the case with the company, the short-term share price movements might hinge more on what Musk says that what the numbers show.

Tesla earnings: the robo-revolution

Tesla believers, though, don’t tend to have their faith shaken easily. Few are more bullish than Dan Ives, global head of technology research at Wedbush Securities.

Ives points to an uptick in Chinese sales during June as one reason for optimism ahead of Tesla’s earnings.

“Despite seeing more low-cost models enter the market from Chinese OEMs like BYD, Nio, Xpeng, and others, the company’s recent updates to the Model Y spurred increased demand,” says Ives.

With the long-awaited robotaxi launch having taken place in Austin earlier this month, there will be plenty for Musk to shout about if he wants to. Investors will look for updates on all things robotics when gauging Tesla’s mid-term prospects.

“There are a number of other key endeavors at Tesla including Optimus and the future of robotics, with Tesla one of the clear future leaders in AI in our view,” says Ives.

Thanks for following our reporting ahead of Tesla and Alphabet's earnings. We're leaving things here for today, but join us here again tomorrow morning for a full day of preview and analysis ahead of live coverage of the earnings releases in the evening.

Good morning, and welcome back to our live coverage of big tech earnings season.

This evening sees both Google parent Alphabet and Elon Musk's Tesla announce their second quarter (Q2) results.

Both companies are coming into this earnings season facing challenges as well as headwinds from the rise of artificial intelligence (AI). Follow here live for rolling previews and live updates from both earnings calls.

When do Alphabet and Tesla announce earnings?

To recap, both Tesla and Alphabet announce their Q2 earnings today, after US markets close. That means any time from 9pm in the UK.

Tesla and Alphabet will host an earnings call where management will field calls from analysts. These are scheduled to take place back to back. The earnings release for each company could land any time between the close of markets and the start of the earnings call, but they tend to land fairly soon after markets close.

The key timings are summarised in the table below:

Alphabet and Tesla earnings: what to expect

Analysts are forecasting the below revenue and earnings per share figures at Alphabet and Tesla’s releases this evening, according to consensus estimates from analysts polled by FactSet and LSEG:

Based on FactSet estimates, analysts expect Tesla’s revenue to fall 12.6% year-on-year, and for its earnings to fall by 23.1%.

The forecasts imply a 10.9% increase in revenue and a 15.3% increase in earnings for Google’s parent company Alphabet.

Alphabet earnings: beyond the numbers

As ever with big tech earnings, it is less likely to be the headline numbers that dictate which way Alphabet's shares trade immediately after it announces results today.

Instead, the data and comments from management surrounding the longer-term challenges and opportunities is likely to be the main driver.

In Alphabet's case, this all boils down to whether or not the potential gains from AI outweigh the threats it causes to the Google parent company's business.

"The rise of ChatGPT and other AI platforms has created unprecedented challenges for Google's search business," says Fabien Yip, market analyst at IG. "These new competitors offer conversational interfaces that provide intellectual answers to complex questions, potentially reducing users' reliance on traditional search engines and the advertising revenue they generate."

Google has developed competitors to ChatGPT, particularly its latest model Gemini 2.5 Pro, and investors will look for evidence of growth and adoption of Gemini during tonight's earnings call.

There is also the opportunity for Google Cloud to keep taking market share from competitors, like Amazon Web Services and Microsoft Azure.

"Innovation in AI enterprise solutions will be crucial for Google Cloud's continued success," says Yip. "The company's ability to integrate cloud offerings with other Google products like Workspace provides a competitive advantage that rivals find difficult to replicate."

Could Tesla invest in xAI?

One topic that could come up on Tesla’s earnings call this evening is the possibility of the company investing money into Elon Musk’s artificial intelligence start-up, xAI, which makes the Grok chatbot.

“Tesla is about to embark on an aggressive AI-focused strategy that we believe will include owning a significant piece of xAI,” says Dan Ives, global head of technology research at Wedbush Securities. “While near-term and this quarter the numbers are nothing to write home about, we believe investors are instead focused on the AI future at Tesla.”

Tesla investing in xAI would be subject to a shareholder vote later this year. Historically, Tesla investors have tended to follow Musk’s lead when it comes to corporate votes, but Josh Gilbert, market analyst at eToro, feels that convincing investors to put Tesla money into another Musk company could be a hard sell.

“Even if there is a theoretical future benefit for Tesla, it’s going to be a very hard case to make,” he says.

Winning the AI race: Trump to speak at AI summit as Tesla announces earnings

Today’s tech earnings announcements are conveniently timed, coinciding as they do with a major event in American AI.

President Donald Trump is due to speak at the ‘Winning the AI Race’ summit hosted by the All-In podcast and the Hill and Valley Forum in Washington, DC today.

Along with senior leaders from tech companies like Palantir and VC firms such as Y Combinator, Trump is expected to outline a roadmap to making the US the world’s leading AI economy.

Dan Ives, global head of technology research at Wedbush Securities, anticipates three main strands:

• The build-out of AI infrastructure;
• Innovation aimed at blocking states’ ability to hinder AI development with regulation;
• Ensuring that global US allies adopt its models, rather than those of “foreign adversaries”.

“The Trump keynote will likely aim at outlining a national AI strategy while targeting aggressive plans to accelerate chip exports reflecting the new administration’s elevated focus on winning the AI race,” says Ives.

Trump’s address is scheduled to take place at 5pm Eastern time, and as such could overlap with both Alphabet and Tesla’s earnings calls.

TSLA and GOOGL shares: one hour until US markets open

There is just under an hour to go until US markets open for the final session before Tesla and Alphabet announce their results.

Yesterday, Tesla stock gained 1.1%, but pre-market moves suggest Tesla shares could open today slightly below this level.

Alphabet shares likewise saw gains yesterday, of around 0.65%, but look set to open slightly down today.

Tesla share price opens 0.4% down ahead of earnings

US markets are now open, and shares in Tesla have opened the final session before the Q2 earnings release 0.4% below yesterday’s close.

Tesla shares have fallen around 18.3% so far this year

Alphabet’s shares opened today’s session slightly above yesterday’s close, but have since slipped below it.

Investors can expect big changes in both Alphabet and Tesla’s share price in after-hours trading following their earnings announcements today.

Magnificent Seven earnings calendar

Alphabet and Tesla are the first two Magnificent Seven companies to announce their Q2 earnings. Here’s the full schedule with the rest of the season’s releases:

There is a big gap between the first six companies and Nvidia, as is usual. Some semiconductor companies, such as Broadcom, won’t release their results until September.

Google revenue: what to watch in Alphabet's earnings release

Google’s heart and soul is its Search business, but its Cloud division is the fastest-growing segment by some distance.

“Cloud growth is the other key driver for Alphabet, with Google Cloud looking much more competitive for AI workloads than it was in previous cloud wars,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Analysts are forecasting somewhere between 26-27% revenue growth for Google Cloud, implying a figure of $13.04-13.14 billion.

Alphabet’s share price movements following the earnings call could largely depend on whether the figure comes in above or below this level.

Look out also for Google Services revenue. This division includes the core search and advertising revenue that Google’s empire is built upon.

Analysts expect growth here to slow to 8.5%, implying a figure of $80.21 billion. Beating that would suggest that Google Search is more resilient than thought to the generative AI threat – for now at least. However, falling short could set alarm bells ringing.

We're going to pause coverage for a few hours, but we'll be back around 9pm, when US markets close. Join us then as we report Tesla and Alphabet's earnings releases live.

Tesla shares look set to close up ahead of earnings

Good evening, and welcome back to our live coverage of Alphabet and Tesla's results.

Tesla shares opened this session down, but are around 0.3% up for the day as we head into the final minutes of regular trading.

Shares in Alphabet, though, have fallen through this session. Will Q2 results, and the subsequent earnings calls, change the picture for either stock?

US markets close; Alphabet and Tesla results now due

US markets have now closed. Alphabet shares finish this session 0.58% down, while Tesla's stock gained 0.14%.

Attention now shifts to the imminent release of each company's Q2 earnings report. As a reminder, here's what analysts polled by FactSet and LSEG are expecting:

BREAKING: Alphabet earnings rise 22% year-on-year

Alphabet's headline figures are in:

• Revenue of $96.4 billion, 14% up year-on-year
• Earnings per share of $2.31, up 22%

Alphabet beats on revenue and earnings

Both earnings and revenue came in above analysts' expectations. Google Search and Google Cloud revenue have both beaten expectations too.

Services revenue increased 12% to $82.5 billion, while Cloud revenue grew 32% to $13.6 billion. Analysts had been forecasting these segments to grow by 8.5% and 27% respectively.

Despite this, Alphabet shares have fallen 2.3% in after-hours trading. A reflection, perhaps, of how high market expectations are on the big tech giants.

BREAKING: Tesla earnings fall by 23%

Tesla has now released its results. The headline figures:

• Total revenues down 12% year-on-year to $22.50 billion;
• Earnings per share down 23% to $0.40.

Numbers like these were expected; earnings per share is exactly as FactSet analysts had forecast, while revenue is a touch higher.

Tesla shares are, in fact, gaining ground in after-hours trading following the earnings release.

Alphabet bumps capex to $85 billion

Alphabet's results make great reading on the face of it. Beats across the board, and the core Google business lines (especially Search and Cloud) have outperformed expectations.

The share price is tanking all the same.

One reason for this could be a big spending announcement.

"We are increasing our investment in capital expenditures in 2025 to approximately $85 billion and are excited by the opportunity ahead," said Alphabet CEO Sundar Pichai in the earnings release.

Has this big spending increase caught the market off-guard? AI is known to need big cap-ex from the major players, but some investors may be baulking at the level of this spend.

Tesla: affordable car is now in production

Tesla stock made gains immediately after its results were released - though these have since reversed.

Poor financial results had already been factored in ahead of today's results, given the deliveries were announced earlier in the month.

But there are positives in the earnings release. One of these is an announcement that the long-awaited affordable car began production in June, and that this will scale up in the second half of 2025.

The announcement also states that Cybercab will enter volume production in 2026. Anything relating to the self-driving car business is going to attract investors' attention. Expect Elon Musk to dive into detail on this during this evening's earnings call.

Alphabet earnings call starts

Alphabet's earnings call is now getting underway. Management will flesh out the raw numbers that have already been released.

Shares are down about 1.25% in after-hours trading at the start of the call.

Alphabet earnings highlights: Alphabet CEO says AI is benefitting Google Search

Alphabet CEO Sundar Pichai is delivering his open remarks, and striking an emphatic tone on the positive impacts of AI on Google’s business.

AI Overviews in Google Search now has over 2 billion monthly users, across more than 200 countries, according to Pichai.

The Gemini app has over 450 million monthly active users. Daily requests were 50% higher in June alone than in the first quarter of the year.

“AI features cause users to search more, as they learn that search can meet more of their needs,” says Pichai. That seems to be a direct response to market fears that generative AI could eat into demand for Google Search.

The market is responding positively to these comments. Alphabet stock has rebounded to above where it closed today’s session, reversing the share price drop that accompanied the results’ initial release.

Alphabet’s capital expenditure in focus

According to Alphabet’s CFO Anat Ashkenazi, the extra $10 billion that Alphabet is spending this year largely reflects “additional investment in servers, the timing of delivery of servers and an acceleration in the pace of data centre production, primarily to meet cloud customer demand”.

Both she and Pichai have spoken of a tight supply environment for compute power, as the world’s technology companies vie for access to the world’s data centre resources.

Part of Alphabet’s response to that tight market is to increase the supply, by building out its own data centre infrastructure. But Pichai warns there will be a lag before that new capacity comes online; demand for compute power is going to outstrip supply for the foreseeable future.

Alphabet's share price has now gained more than 3% in after-hours trading, as investors digest management's framing of the results.

Can Google Search keep making money in the AI era?

A question has come in on the monetisation of Google Search, given the falling number of ad impressions available per click-through in the era of AI Overviews.

Google's chief business offer Philipp Schindler replies: "AI Overviews... continue to drive higher satisfaction [and] higher search uses.

"We see monetisation at approximately the same rate, which gives us a really strong base on which we can then innovate and drive more innovative, next-generation ad formats."

Alphabet's earnings call sees shares gain 2.7%

Alphabet's earnings call has now finished. Shares are up 2.7% in after-hours trading at the end of it.

Now our attention turns to Tesla, whose earnings call will start shortly. At present, Tesla shares are down around 0.4% in after-hours trading.

Tesla: robotaxis could serve half US population by the end of the year

Tesla's earnings call starts with some big statements on the rollout of its (geofenced) robotaxi service.

Robotaxi is set to expand to "well in excess of what competitors are doing" in the next two weeks, says Tesla CEO Elon Musk.

The company is also seeking regulatory approval to launch in the San Francisco Bay Area, Arizona and Florida. Musk says that by the end of the year, Tesla will "technically" be able to offer self-driving rides to half the US population.

"That's our goal, subject to regulatory approvals," said Musk.

Musk aims for 1 million Optimus robots annually within five years

Optimus, Tesla's humanoid robot, will have prototypes this year, followed by scaled production next year, says Musk.

He says that the objective will be to produce one million units per year as quickly as possible - hopefully, within five years, he says.

Market will need more convincing on Google’s AI staying power

The conundrum that surrounded Alphabet, and whether AI is a headwind or a tailwind for Google, still remains even after a strong set of results.

“Alphabet is being forced to adapt or risk becoming a dinosaur in the new AI age,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

The numbers on the key areas – Search and Cloud revenue – were impressive. But the question of monetisation remains.

“The Alphabet AI investment case is something of an enigma,” says Britzman. While the market seems to have decided that Alphabet is destined to be a loser in the AI race, Britzman feels that view is “both short-sighted and overly pessimistic.

“That said,” he adds, “until there’s more confidence that AI integration won’t cannibalise core search revenue, and some clarity around ongoing legal battles, there’s enough uncertainty to cap near-term upside.”

Customers love robotaxi, says Tesla

The opening remarks in Tesla's earnings call are now done. They were unusually uneventful, the robotaxi and Optimus plans notwithstanding.

The first analyst question asks for more detail on the robotaxi rollout.

"Robo taxi has been doing great so far in Austin," replies Tesla's CFO Vaibhav Taneja. "Customers really love the experience. Super smooth, very safe, and just a great experience overall."

He adds that expansion in Austin has already started, and that testing in a number of other cities has already started.

Tesla CFO: not appropriate to discuss xAI investment in earnings call

A question is asked about the benefits of Tesla invested into xAI.

CFO Janeja replies that this isn't the forum to discuss that issue, and that "if there is something which we need to discuss, we'll discuss it separately".

Musk then adds, "Obviously, we're a publicly-traded company. Shareholders are welcome to put forward any shareholder proposals that they'd like. I personally encourage that."

Tesla stock falls 2.8% in after-hours trading

Tesla shares slumped at around the time that Elon Musk finished his prepared remarks. They are now down around 2.8% in after-hours trading.

Most of the comments have been a little underwhelming, and non-specific. A lot of reasons given for delays in delivery - but many of these same reasons have been given at previous earnings calls.

Is the market starting to lose patience with Tesla?

How will the end of EV tax credits impact Tesla?

The end of tax credits could lead to "a few rough quarters", says Musk in response to a question on the subject. President Donald Trump has said that he will remove the electric vehicle (EV) tax credits that were introduced during the Biden era later this year.

Musk says that while tax incentives for EVs are vanishing in the US, they are still in place in much of the rest of the world.

"On the other hand, autonomy is most advanced and available from a regulatory standpoint in the US. So does that mean we could have a few rough quarters? Yeah, we probably could."

While the second half of this year and the first half of next could be tricky, Musk says that "once you get to autonomy at scale in the second half of next year... I'd be surprised if Tesla's economics weren't very compelling".

That's the end of Tesla's earnings call. Shares are down over 4.6% in after-hours trading, with investors having responded negatively to a cautious set of responses from Musk and his team.

Thank you for following our live coverage. That's everything for this evening, but we will be back tomorrow morning with rolling analysis and reaction to Google and Tesla's earnings.

Tesla’s long game

Good morning, and welcome back to live coverage. We’ll spend today breaking down the implications of last night’s earnings results from Alphabet and Tesla.

There are two contrasting stories there. Alphabet’s share price gained 2.3% in after-hours trading as management was able to paint an upbeat picture of Google’s place in the AI ecosystem, in spite of the challenges to its core business that the technology poses.

But Tesla’s share price fell 6.1% in after-hours trading, as CEO Elon Musk warned that the company could be set for a tough period until the second half of 2026.

“The typical playbook for the past few quarters has been declining fundamentals but enough AI hype to keep investors sleeping at night,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Musk’s cautious tone went against this typical pattern, but he was as ever bullish about the longer-term plan for Tesla, saying it is easier to predict where the company will be in five years’ time than in one or two.

“Tesla is in a very small cohort of companies with enough growth potential that investors are, for now at least, willing to look past weakening core financials,” says Britzman. “Last night's comments confirmed many fears around tariffs, rising costs, tougher margins, and struggling cash flows.

“But with that now firmly built in as the base case, the AI story can take back the wheel.

Robotaxi versus Waymo

One of the big questions that surrounds Alphabet and Tesla – and which both management teams discussed on last night’s earnings calls – is the future of the self-driving car market. Google’s Waymo and Tesla’s robotaxi are viewed as the two front-runners.

Waymo has now covered 100 miles on public roads, it was revealed yesterday. But Elon Musk went out of his way to talk down Waymo’s prospects, saying “Google is good at AI, yes, but they’re not good at real-world AI”.

ARK Invest – known for its bullish stance on Tesla – explains why they feel Tesla is the frontrunner in this race.

“Waymo in San Francisco, while more expensive than Uber and Lyft, are already starting to take share,” says Sam Korus, director of research for autonomous technology & robotics at ARK Invest. “And there are a lot of reasons why Tesla should be able to offer rides for a lower price than Waymo.

“They're using vision only, so their vehicles are less expensive. They have an adaptable fleet, so they can meet peak trough demand, without having underutilised vehicles. And they've got manufacturing scale so don't have to negotiate with other auto manufacturers.”

He adds that Tesla produces around 5,000 cars per day, which is around double the size of Waymo’s entire fleet. All of these can hypothetically become self-driving robotaxis.

“At the end of the day, people are going to look at an app and say, I can get from point A to point B for less money,” adds Korus.

Google Search looks safe for now

A major highlight for Alphabet last night was the resilience that its core Google Search business showed.

“Management commentary should alleviate investor caution around the perceived risks of generative AI on the Search business,” said Scott Devitt, managing director, Equity Research at Wedbush Securities. “These concerns are overdone, in our view, with Alphabet validating its ability to navigate this period of transition by exhibiting healthy query volume growth across both new and traditional surfaces.”

Top-line revenue growth for the Search arm beat analysts’ expectations, coming in at 11.7%. Paid click growth accelerated from 2% in Q1 to 4% in Q2.

While Alphabet still trades at the lowest earnings multiple of all Magnificent Seven companies, Devitt feels there is room for this improve over the coming quarters as investors become more comfortable with “the current macro environment, regulatory risk and the impact of generative AI on the business”.

Tesla and Alphabet earnings recap

Here’s a reminder of the headline results that Alphabet announced last night:

Tesla’s results looked like this:

Expectations are based on the consensus estimates of analysts polled by FactSet.

Tesla stock continues to fall

Any hope that Tesla stock would bounce back quickly from its after-hours decline has been dashed today.

Tesla's share price opened today's session 6.8% below yesterday's close, and has since fallen further, currently down around 7.6%.

The data centre supply gap

There was much talk during Alphabet’s earnings call yesterday on the tightness of compute supply: that is, how much resource is available in AI-dedicated data centres compared to the demand for it.

That tight supply is what eventually ameliorated the market’s response to Alphabet’s eye-watering $85 billion capex figure for 2025. There is huge demand for resources, and with Google Cloud revenue growth exceeding expectations, it makes sense for Alphabet to invest in capturing this market.

“AI adoption is growing at a speed far greater than what anyone is prepared for,” says Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics. Morningstar’s demand model forecasts US data centre capacity to triple between 2024 and 2030.

So while Google’s investment seems extreme at first glance, this is a market with significant growth potential. Google Cloud’s backlog increased 38% year-on-year, “implying continued momentum in the coming periods”, says Scott Devitt, managing director, Equity Research at Wedbush Securities.

Thank you for following our coverage of Alphabet and Tesla's earnings releases. We're going to end things here for now, but we'll be back next week for coverage of the next four Magnificent Seven stocks to announce earnings: Amazon, Apple, Meta and Microsoft.

The net worth of the richest person in the world is double that of the billionaire with the second-largest fortune.

While the wealthiest people in the world often change places on the rich list, the one person who has consistently held the top spot since 2025 is Tesla CEO and SpaceX founder Elon Musk – except for one time when he briefly dropped to second place, behind Oracle’s Larry Ellison last year.

In total, the five richest people in the world have a combined net worth of close to $2 trillion, according to Bloomberg’s Billionaire Index. Using the same index, we explore their wealth in detail below.

As the wealthiest bunch are all men, we take a look at the richest woman in the world in a separate guide.

The richest person in the world

1. Elon Musk  

Elon Musk is the richest person in the world, with a staggering $733 billion to his name.

The South African entrepreneur has added over a hundred billion to his net worth in the past year, thanks to buzz around the upcoming SpaceX initial public offering (IPO), touted to be the largest IPO in history. It has made him richer than the two billionaires right below him on the rich list combined.

Moreover, Tesla stock has surged nearly 14-fold since the pandemic, with a market capitalisation of $1.36 trillion at the time of writing.

Musk owns around 11% of Tesla and roughly 50% of SpaceX. We break down Elon Musk’s net worth in a separate guide.

2. Larry Page

Alphabet co-founder Larry Page’s net worth has topped $300 billion for the first time in history, as Google’s parent company’s stock rose in the latest Mag 7 earnings season after increased AI spending. His net worth now stands at $328 billion.

A majority of Page’s wealth comes from his stake in Google, which rebranded as Alphabet in 2015, grouping all its divisions – including Gmail, Android and YouTube – under one umbrella. He’s not the only mind behind Google in the rich list – as you’ll see below.

Find out more about Larry Page's net worth.

3. Sergey Brin

Sergey Brin, co-founder of Alphabet, is a new entrant to this list. He has a net worth of $305 billion, not far behind that of fellow co-founder Larry Page.

The American businessman was the president of Alphabet until 2019, and has since remained a board member and a controlling shareholder. He co-founded Google with Larry Page in 1998, after the two met at Stanford University.

Alphabet became the fourth company to achieve a market capitalisation of $4 trillion, joining the likes of Nvidia, Microsoft and Apple to hit the milestone. Its stock grew by 65% last year, marking the largest single-year jump for the company since 2009.

Brin has been donating millions of dollars of his shares in Alphabet to fund research on Parkinson’s disease.

4. Jeff Bezos

Jeff Bezos has a net worth of $284 billion. The billionaire is most famous for founding Amazon in 1994, which started when Bezos saw a gap in the market for e-commerce and began to sell books online, working out of his garage. Now, the empire has a market capitalisation of $2.85 trillion.

Bezos also owns The Washington Post, one of the largest newspapers in the United States. He also has a stake in Blue Origin, a space exploration company he founded in 2000.

Bezos is increasingly looking to dominate the world of film and fashion. He was the lead sponsor and honorary co-chair of the 2026 Met Gala and donated $10 million, making it the largest individual financial commitment in the event’s history.

Moreover, last year, Amazon took creative control of the James Bond franchise. Back in 2021, it acquired MGM Studios, a historic American production company, for $8.45 billion. Some of MGM’s most popular films include The Wizard of Oz, Gone with the Wind and 2001: A Space Odyssey.

Find out more about the factors that contributed to Jeff Bezos’ net worth.

5.  Larry Ellison

Larry Ellison is the man behind one of the world’s largest software companies, Oracle, which he founded in 1977. His net worth is $248 billion.

Ellison owns more than 40% of Oracle – making him the largest shareholder – and has holdings in Tesla, having been one of the company’s board of directors from 2018 to 2022.

On 10 September 2025, Ellison briefly overtook Elon Musk as the richest person in the world, a title Musk had claimed for just over 300 days. This was due to Oracle’s earnings report, which revealed a deal with OpenAI.

It resulted in gains of 36% in a single day for the database software company’s share price, adding almost $250 billion to its market capitalisation and around $89 billion to Ellison’s personal wealth. Major Oracle shareholders also became wealthier instantly.

Read more on Larry Ellison’s net worth and how he makes the rest of his billions away from Oracle.

Holders of NS&I Premium Bonds can check now to see whether they have won a prize in the November prize draw.

The government-backed savings provider has repeatedly increased the number of prizes on offer in recent months, so even if you don’t manage to land the £1m top prize, there are still lots of smaller prizes available for savers in every draw.

In August NS&I increased the Premium Bonds prize rate to 4.65% to 4%. The prize rate is essentially a steer on what sort of return you would get from Premium Bonds if you have average luck, rather than any guarantee, but with the higher sums now in the overall prize fund the odds of winning money have improved from 22,000 to 21,000 to one.

Two bondholders will get a visit from Agent Million on account of landing the top prize, but there are millions of prizes of other sizes that could be heading your way. In the November NS&I Premium Bond prize draw there were more than 900 prizes of £10,000, over 56,000 £500 prizes and around 2.3 million £100 and £50 prizes.

Here’s how to check your Premium Bonds for the November draw.

HOW TO CHECK FOR NOVEMBER’S NS&I PREMIUM BONDS DRAW?

You can check from now to see if you have won a prize in the November Premium Bonds prize draw.

There are a couple of different ways of checking, from using the prize checker page online to logging into the NS&I prize checker app. 

Checking is easy to do, you’ll just need the bond number to hand. These checks allow you to go back to draws which have occurred over the last six months.

Another option is to set up your Amazon Alexa smart speaker with the prize checker skill, which you can do through the Alexa app, and enter your NS&I number. From that point onwards your Alexa will keep you updated on any winnings.

A total of 5,795,962 prizes will be paid out in Premium Bond prizes in November, worth a total of £471,646,425. There were 121,715,206,105 Bond numbers eligible for the draw.

Here are the details of the NS&I Premium Bond prize draw for November:

HOW WILL MY PREMIUM BOND PRIZE BE PAID TO ME?

Winners will see their prize paid into their designated bank account, though you can choose to have the money reinvested into more Premium Bonds. You can set up automatic payments on the NS&I website.

Opting for the reinvestment route boosts your chances of winning in future draws, since you have more eligible bonds. It also means you do not risk having unclaimed prizes sitting around.

HOW TO CHECK FOR UNCLAIMED PREMIUM BOND PRIZES? 

Every year, millions of Premium Bond prizes go unclaimed. If you have not checked whether you’ve won money for some time, then there are a few different ways of finding out whether you have any cash waiting to be claimed.

If you’re registered for online or phone services, you can call NS&I for free on 08085 007 007.

If you aren’t registered, you can write to NS&I and ask if you have any unclaimed prizes.

To help the process, it’s a good idea to include the following information:

• Premium Bonds holder's number
• Your current name
• Any previous names
• Your current address
• Any previous addresses where Bonds may have been registered
• Your signature

You can then send your letter to: NS&I, Sunderland, SR43 2SB.

If you have any outstanding prizes, then they will not be sent directly to your bank account. Instead they will be posted to you at your home address. 

NS&I will reveal this month's Premium Bond winners this morning (1 November). With prizes ranging from £25 to £1m – we explain when you can check to see what you may have won?

National Savings and Investments (NS&I) has handed out 643 million prizes worth £27bn since the first draw in 1957. In September alone, ERNIE handed out  5,782,602 prizes worth £470,559,225. 

Two lucky bondholders become millionaires every month, but thousands of other customers receive prizes from £25. 

We explain how to check if you’ve won this month and whether now is a good time to buy Premium Bonds. 

Did you win in November’s NS&I Premium Bonds draw?

You can check if you won – as well as any prizes on offer on any given month, any winnings you may have had over the past six months, and any unclaimed prizes you might have – on the NS&I app, available on Android or iOS, and the official prize checker page on the NS&I website. 

For the November draw, you can check from 2 November.

You can also set up your Amazon Alexa smart speaker to let you know. Just activate the prize checker skill on the Alexa app and enter your NS&I number. After that, Alexa will keep you up to date. 

How will NS&I prizes be paid to me? 

Prizes will be paid into bank accounts or reinvested into premium bonds, as this is far quicker and safer than waiting for a cheque in the post. 

You can set up automatic payments on the NS&I website. 

Should you buy Premium Bonds?

NS&I has been hiking the rates on its products lately as it tries to keep up with the rates on the best savings accounts.

The savings provider hiked its Premium Bond prize fund rate to a 24-year high in August, meaning the odds of winning will improve from 22,000 to 1 to 21,000 to 1. 

Additionally the minimum investment of £25 makes Premium Bonds an easy way to start saving. 

But it’s worth remembering that you won’t earn any money on your investment. If you’d like to earn a return, NS&I has boosted the rate on its one-year fixed bonds to 6.20%.

It also boosted the rate on its Green Savings Bonds to 5.7%. 

The best savings accounts are offering rates of up to 7% too, so it’s always worth shopping around to make sure you’ve found the best home for your money. 

Investors are increasingly buying into the AI trend, while their love affair with Tesla continues, according to new data showing the most popular stocks of 2023.

Interest in Netflix, on the other hand, has plummeted, and the streaming giant is no longer in the top 10 list of most traded stocks.

The investment platform Saxo reveals that Tesla is the most traded stock by UK clients so far this year (from 1 January to 18 July), continuing its dominance as the number one share.

Amazon and Apple have switched places, with Amazon now in second place, and Apple third.

However, perhaps most notable is two AI stocks that are climbing up the top 10 ranks. Nvidia has edged into the top five while Palantir Technologies, which didn’t make the top 10 for the same period in 2022, ranks ninth for 2023. 

Meanwhile, Netflix has crashed out of the top 10, suggesting it could be struggling in the streaming wars against newer competitors. It has also made significant changes recently to its account models like cracking down on password-sharing. 

Anaam Raza of investment platform Saxo says that AI companies like Palantir Technologies and Nvidia becoming some of the most popular rising investments of 2023 “does not come as a surprise considering the overwhelming interest in this industry and megatrend”.

She adds: “The fast-growing nature of AI, which has been a hot topic both inside and outside of the world of trading, makes it an attractive option for investors to back. 

The competition will no doubt grow fierce in the second half of 2023 as companies put cash behind the ever-innovating sector in an effort to keep up with the big players, such as the success of OpenAI’s ChatGPT.”

Holly Mackay, founder of the financial website Boring Money, calls it an “AI frenzy” and says in her blog that the share prices of Tesla and Nvidia have shot up this year. 

“Tesla has accelerated by over 100% and Nvidia has swollen its waistline by 190% since January,” she comments. “Nvidia recently joined the exclusive $1 trillion market capitalisation club, nipping at the heels of Amazon and getting closer to Alphabet, Facebook and Apple. 

Collectively these five companies (which I like to summarise as NAAAF) make up one-quarter of the S&P 500 and have accounted for almost all of its gains this year. So it’s a pretty polarised story that can be loosely summarised as AI = good and Everything Else = bad.”

The Saxo data also shows that Microsoft has held its spot in fourth place, while Mark Zuckerberg’s Meta slipped two places from fifth to seventh in a year that saw the company make significant job cuts after reporting earnings were down at the latter end of 2022. 

Alphabet, Alibaba and Rolls-Royce make up the rest of the top 10, taking the sixth, eighth and tenth spots respectively. Last year, BP was in ninth position but it has now disappeared from the top 10.

In terms of Netflix’s departure from the top 10, Raza comments: “This indicates Netflix may be losing the streaming wars in what has become quite a saturated market for consumers. 

With the company recently also announcing changes to its subscription model for new users and the scrapping of its basic ad-free tier, investors may have doubts about the stability of Netflix’s future.”

Menhaden Resource Efficiency seeks to invest in businesses that either deliver or benefit from the more efficient use of resources. Our approach recognises companies working to reduce their environmental footprints. We overlay this thematic focus with strict criteria covering both quality and value. We like to own businesses with enduring assets (and franchises) generating cash flows that are predictable over the long term and not at risk of disruption. 

These businesses must benefit from enduring competitive advantages and possess genuine pricing power, enabling them to outgrow inflation. Finally, we want to buy them at reasonable valuations. This approach has served us well. Our equities span three broad themes: technology/cloud; aviation; and infrastructure. These all offer secular growth and their industry structures provide the incumbents with formidable competitive positions. 

Post-pandemic air travel takes off

Commercial aviation’s recovery from Covid is nearly complete. Air travel remains a growth story. Three-quarters of the global population have never been on an aeroplane. Strict regulations and efficiencies from operating fewer aircraft models bolster growth in the sector and deter rivals. Fleet renewal requirements and the need to decarbonise remain unchanged. 

We own positions in Airbus (Paris: AIR) and Safran (Paris: SAF) as the firms’ aircraft and engines offer a step change in fuel efficiency. Both companies’ decarbonisation targets have been recognised by the Science Based Target initiative. They are the dominant suppliers in the fastest-growing narrow-body aircraft segment. Airbus’s production is sold out until 2029. Deliveries should increase from a target of 720 this year to more than 1,000 in the coming years and underpin significant earnings growth. Safran should continue to benefit from a growing installed base of engines and their recurring high-margin aftermarket sales. 

Cloud computing, meanwhile, offers major cost and emission savings compared to traditional enterprise datacentres. These stem from economies of scale and higher utilisation rates. The demand for computing power and the value it provides is only increasing. We hold positions in each of the major providers: Amazon (Nasdaq: AMZN ), Microsoft (Nasdaq: MSFT), and Alphabet (Nasdaq: GOOGL). 

Amazon’s CEO Andy Jassy says cloud computing is still in an early innings: 90% of IT spend remains on-premises. These firms will be among the chief beneficiaries of growth in artificial intelligence (AI). We expect their cloud businesses to support their earnings growth rates for a long time. 

Driven by duopolies

Economies of scale mean that transporting freight by rail is up to four times more fuel-efficient than by road. This provides North American rail operators with a significant cost advantage over trucks on longer-haul routes as no one is building railroads today. The industry operates in a series of duopolies and companies have pricing power. GDP growth should prove supportive of volumes. 

We hold positions in Canadian National Railway (Toronto: CNR), Canadian Pacific, now renamed Canadian Pacific Kansas City (Toronto: CP) and Union Pacific (NYSE: UNP). Their long routes lessen competition from trucks. Their management teams consistently return cash to shareholders via dividends and buybacks. The Canadian duo should benefit from faster volume growth as Canadian ports gain market share from US ports. Canadian Pacific’s volume growth should also benefit from new routes following the acquisition of Kansas City Southern. New leadership at Union Pacific should help it fulfil its potential and deliver genuine improvements in operations and profits. 

Join us at the MoneyWeek Summit on 29.09.2023 at etc.venues St Paul's, London.

Tickets are on sale at www.moneyweeksummit.com

MoneyWeek subscribers receive a 25% discount.

Jeff Bezos is a billionaire thanks to Amazon’s domination in the world of online shopping.

The founder of the e-commerce company trails behind some of the richest people in the world — namely, Elon Musk and Mark Zuckerberg — in the Bloomberg Billionaire Index with a net worth of $240 billion. Meanwhile, Forbes puts his wealth at $233.4 billion.

While the billionaire entrepreneur is often making headlines, all eyes are currently on Bezos and Lauren Sánchez’s wedding celebrations, a star-studded event that has reportedly cost millions.

There’s also a lot of buzz around what Amazon MGM Studios decides to do with the next James Bond movie as it assumes creative control of the 007 franchise.

We explore key factors that have expanded Jeff Bezos' net worth below.

How did Jeff Bezos start Amazon?

Jeff Bezos was born in Albuquerque, New Mexico, on 12 January 1964 and was raised in Houston, Texas and Miami, Florida. He studied computer science and electrical engineering at Princeton University and graduated with honours.

Bezos worked at many companies on Wall Street, including Fitel, Bankers Trust and D.E. Shaw. But despite his stable finance career, he made a risky move to e-commerce in 1994, by founding Amazon.com — an online bookstore that would revolutionise the way people shopped for books.

Initially, the company was run out of Bezos’ garage, with a handful of employees. In 1995, he managed to convince his siblings, Mark and Christina, to invest $10,000 each in the company. Their investment paid off, and within a year, the company was selling books to customers around the world.

In 1997, Amazon shares debuted via an initial public offering at $18 per share. It made Bezos a billionaire overnight. As of June 2025, Amazon’s market capitalisation is a staggering £1.728 trillion.

Bezos continued to expand Amazon's offerings, adding music, films and, eventually, just about everything else under the sun. Today, Amazon is the world's largest online retailer. The company was responsible for introducing the Kindle, an electronic book reader, in 2007.

In 2021, Bezos stepped down as Amazon CEO, and since then, he has shifted his focus towards other projects like Blue Origin.

Bezos now owns around 8.6% of Amazon, valued at roughly $190.56 billion. Last year, he sold about $13.5 billion worth of shares.

Other factors contributing to Jeff Bezos' net worth

In addition to his success with Amazon, Bezos has made several other investments and acquisitions that have contributed to his net worth.

He bought The Washington Post, one of the largest newspapers in the United States, for $250 million in 2013. Bezos also has a significant stake in Blue Origin, a space exploration company he founded in 2000. The all-female flight crew for its New Shepard rocket included singer-songwriter Katy Perry and TV star Gayle King.

Bezos also holds an extensive real estate portfolio stretching across 420,000 acres, making him America’s 23rd largest landowner, according to the Land Report. This includes a $165 million Warner Estate in Beverly Hills, a 14-acre compound in Maui that cost him $78 million, and three properties on an exclusive island near Miami, which he bought for a whopping $234 million, per the Wall Street Journal.

He also has a 417-foot superyacht, Koru, that cost him at least $500 million, two jets, and two helicopters.

Other than that, his portfolio also includes stakes in Uber, Airbnb, financial news website Business Insider, cloud human resources company Workday, and software company Nextdoor.

Bezos has pledged to give away a majority of his wealth to charity during his lifetime. He committed $10 billion towards fighting climate change through his Bezos Earth Fund, and gave out $117 million in grants to support homeless families across the US and Puerto Rico.

How much did Jeff Bezos and Lauren Sánchez's wedding cost?

The Bezos-Sánchez wedding in Venice cost at least $20 – 25 million, according to Forbes’s estimates. Meanwhile, Reuters places the figures between $47 – $56 million.

There was no compromise on its 200-attendee star-studded guest list, with appearances made by Bill Gates, Leonardo DiCaprio, Kim Kardashian and several high-profile celebrities, who were staying at five-star luxury hotels across Venice.

Forbes also reported that the couple’s wedding planners commissioned around 30 private water taxis to escort the guests (Venice has 280 in total), which cost them roughly $270,000 for three days. The catering was by a three-Michelin-star chef, likely to have cost $360,000 for food and beverages for a night, or $1.1 million for the three days.

Bezos donated nearly $3.6 million in total to Corila, UNESCO’s Venice office, and the Venice International University.

While extravagant, the amount pales in comparison to Anant Ambani and Radhika Merchant’s wedding last year, which cost between $400 – $500 million, and included performances from Rihanna and Justin Bieber.

However, Business Insider reports that the Bezos-Sánchez wedding boosted Venice’s economy by a staggering $1.1 billion. This is based on analysis from Italy’s tourism minister and consultancy firm JFC. A lion’s share of the figure (over 90%) came from publicity and media exposure.

What will Amazon do with the James Bond franchise?

Amazon revealed on 20 February 2025 that it had taken creative control of the iconic James Bond franchise. This comes after the e-commerce giant bought MGM — which shares the rights to the series with Eon — in an $8.5 billion deal. This gave Amazon access to a catalogue of more than 4,000 movies and 17,000 shows.

It also means that Amazon MGM Studios and Eon Productions now co-own the intellectual property related to the James Bond franchise.

In more recent news, Amazon announced that legendary Oscar-nominated filmmaker Denis Villeneuve of Dune and Blade Runner 2049 fame will direct the next James Bond film.

Variety reported that the studio is interested in casting Harris Dickinson, Tom Holland, or Jacob Elordi for the role of James Bond.

“The worst of the post-pandemic hangover is fading” for Big Tech, says Meghan Bobrowsky in The Wall Street Journal.

Technology shares became overheated during the first 18 months of the pandemic as the world rushed to work online; tech firms “believed their own hype and over-expanded” says Tom Stevenson in The Telegraph. Reopening and rising interest rates proved a tough wake-up call last year.

Between March and December 2022 Amazon’s shares lost half their value, while Apple’s market cap slipped from $3trn to $2trn. But Big Tech has bounced back: just five tech stocks are responsible for 66% of the S&P’s 8% rise so far this year. The tech-focused Nasdaq 100 index has surged by 22% since 1 January, while Facebook-owner Meta has vaulted by 87%.

The US equity market is once again dependent on the fortunes of a handful of giant businesses.

First quarter reassures

Alphabet, Amazon, Meta and Microsoft recently reported first-quarter revenue growth rates of 3%-9%, say Richard Waters, Elaine Moore and Patrick McGee in the Financial Times. That is “a far cry from two years ago” when the lockdown boom “boosted Big Tech’s combined revenue by 41%”. But it was still an improvement from poor fourth-quarter levels, as cloud computing demand and PC sales slumped. The results have reassured investors that the tech rout is over.

“Global digital advertising spend is holding up” better than feared, says Lex in the same paper. Margins have been improved by “heavy cost-cutting via lay-offs”, while investors are excited by the “tantalising prospects from artificial intelligence” (AI).

The race for AI won’t be cheap. One estimate suggests AI spend will hit $800bn over the next ten years. That will only grow the gap between the tech giants that have the cash to splurge on aggressive research and smaller firms “such as Zoom and DocuSign” whose shares “remain in the doldrums”. “Companies can’t cut their way to prosperity,” says Tae Kim in Barron’s.

Rebound rebuttal

This year’s tech lay-offs risk improving margins today at the expense of revenue growth tomorrow. After dipping last year, valuations are once again eye-watering: “Big Tech stocks are trading at 20 to 70 times 2023 earnings while growing at single-digit rates – not a good combination for future returns.”

America’s Nasdaq index has rebounded 20% from its 2022 low, prompting some to talk of a new bull market, says Russ Mould of AJ Bell. Yet it remains 24% below its 2021 peak. The rally is reminiscent of the 2000-2003 bear market, during which the index staged nine separate rallies.

Yet the Nasdaq didn’t get back to its March 2000 peak until 2015. “It is highly unusual for the leaders in the last bull market to be the leaders in the next one.” Tech investors should “proceed with caution”.

This article details 2022 winners - see our article on the December 2023 bond winners for the latest.

NS&I (National Savings & Investments) has announced the winners from the December prize draw, which includes two jackpot winners.

The NS&I Premium Bond jackpot winners come from Wandsworth and the Scottish Highlands – if you live there and hold Premium Bonds, you could be in for an early Christmas treat.

The first winning bond number is 414XW486235 and belongs to someone in the Scottish Highlands. The winner holds £45,000 in Premium Bonds and purchased the winning bond in September 2020.

The second winning bond number is 150FZ477948 and belongs to someone in Wandsworth. The winner holds £29,042 in Premium Bonds and purchased the winning bond in August 2009.

The two jackpot winners will have been visited by NS&I’s “Agent Million”, who gave the news about the win in person.

If you didn’t win the jackpot, then you could still be a winner of some sort with a total of 4.9 million prizes being released this month, ranging from as little as £25 to as much as £100,000. The total value of the December Premium Bond prizes was £219m. You can check if you are a winner from 2 December - we explain below how to check.

The number of prizes given out each month was raised in October, meaning that the odds of winning has improved to 24,000 to one. Earlier this year, NS&I also increased the interest rate on its savings products to entice more savers in.

December NS&I Premium Bond winners: the breakdown of the prizes

Here are the prizes picked by the NS&I’s Ernie – the machine that generates the winning numbers.

Around £80m in Premium Bond prizes are currently sitting unclaimed, so it is worth checking if you are a winner – not just for the December draw but also for any previous months or years. See our article on the November Premium Bond prize draw.

How to check if you are a Premium Bond winner

It’s easy to check if you are a NS&I Premium Bond winner. December winners can check on 2 December. Here are all the ways to check:

• Use the prize checker feature on the NS&I website
• Download NS&I’s prize checker app onto your smartphone
• Ask Alexa. You can even state your NS&I number to a device that has Amazon’s Alexa service enabled, and check if you’re a lucky winner.
• If you have registered online with NS&I then you will be sent an email – so check your inbox/spam folder. However, if you haven’t done so then you’ll instead be sent a letter.

Make sure NS&I has the correct contact details – not updating your details could result in you missing out on any notifications and unclaimed prizes.

Premium Bonds vs savings accounts

The return you get from Premium Bonds will come down to how lucky you are. The NS&I says there’s a one in 24,000 chance of one bond winning a prize a month. Essentially, the more you hold and the greater the value, the higher your chance of winning, but calculating the real probability of you winning a decent prize is complicated.

If you’re looking for a more reliable return on your money, you might want instead to use a traditional savings account, with some banks offering as much as 5% interest.

Tech stocks dominated the market in 2021 as demand for the industry’s services exploded.

At the end of 2020, management consultancy McKinsey noted that digital adoption in the pandemic took a “quantum leap” forward as businesses and consumers had no choice but to work, shop and play online.

Nowhere was this trend more apparent than in the performance of the market’s top tech stocks, the so-called FANGs.

Led by the FANGs, tech stocks see revenues surge

The FANG group of tech companies, Meta (Nasdaq: FB) (formerly known as Facebook), Amazon (Nasdaq: AMZN), Netflix (Nasdaq: NFLX) and Alphabet (Nasdaq: GOOG) (the parent company of Google) collectively reported revenues of $532bn in 2019.

By the end of 2020, revenues across the group had jumped by 28% to $680bn. And by the end of 2021 that figure was $876bn, up 29% year-on-year and 64% since 2019.

Investors celebrated. The NYSE FANG+ Index, which provides exposure to the FANGs as well as Microsoft (Nasdaq: MSFT), Apple (Nasdaq: AAPL), Baidu (Nasdaq: BIDU), Nvidia (Nasdaq: NVDA), Alibaba (NYSE: BABA) and Tesla (Nasdaq: TSLA) doubled in 2020 and rose a further 22% in 2021.

But these tech stocks are now falling out of favour with investors. Since the start of this year, the FANG+ Index has slumped by 46%, erasing all of 2021’s gains and taking it back to the level last seen in June 2020.

Meta has been the worst performing stock by far this year. The stock is off more than 70%.

That’s the sort of return you might expect from a struggling penny stock, not one of the world’s most successful (and profitable) tech companies.

Investors lose faith in tech stocks

Analysts are not short of reasons to explain why the market has fallen out of love with these businesses. They point to rising interest rates, disruption, slowing growth and a rotation away from growth to value stocks.

But I think there’s a much simpler explanation. The market was just too overexcited about their prospects, something even the companies themselves are now starting to admit.

This week Meta announced it’s planning to cut 13% of its workforce around the world. CEO Mark Zuckerberg said the cuts were “the most difficult changes we’ve made in Meta’s history” and he went on to say the company was having to make these changes as the firm’s pandemic growth had not lasted.

“Many people predicted this would be a permanent acceleration,” he wrote, referring to Meta’s revenue growth during the pandemic. “I did too, so I made the decision to significantly increase our investments.”

Meta’s revenues jumped from $70bn in 2019 to $118bn for 2021 and Wall Street analysts were forecasting further growth in 2022. They’d pencilled in earnings growth of around 15%.

However, Wall Street is now expecting a slight decline in revenues from the company in 2022 and a staggering 33% decline in earnings.

A lot has changed for these tech stocks in a year.

Growth slows and cuts arrive

It’s not just Meta. Netflix’s growth engine has spluttered as competition has increased and the company has responded by launching an ad-supported version of its platform.

Google is struggling with a slowdown in digital advertising spending and this week Apple has told its suppliers to slow production of its new iPhone14. It has cut orders by three million units.

The e-commerce giant Amazon has also been forced to put its growth plans on hold. Earlier this year Fortune reported Amazon had “killed plans” to open 42 order fulfilment facilities and delayed opening an additional 21 locations.

These tech stocks have had to re-adjust their growth plans, and as a result, the market has had to re-adjust its perception of them.

Meta, Amazon, Apple and Netflix are no longer expected to generate double-digit sales and earnings growth indefinitely. Therefore, they no longer deserve a premium valuation

Could now be the time to buy tech stocks?

When valuing a business, analysts often try to estimate its future profits and work back to estimate how much these would be worth today. In theory, the higher the future potential profit stream, the more investors are willing to pay today.

So, when analysts revise their estimates for future growth lower, that will be reflected in the company’s current stock price.

That’s exactly what we’ve seen happen with these tech stocks over the past 11 months.

However, as the famous investor Benjamin Graham once said, “there are no bad assets, just bad prices.” In other words, everything has its price.

The fact is, none of these companies are going anywhere anytime soon.

Google remains the world’s go-to search engine, and the company’s cloud business serves millions of customers around the world.

Meanwhile, Amazon has built a global logistics giant, investing hundreds of billions of dollars over the past three years alone to develop its edge (it also has a highly profitable cloud division). Fellow FANG+ members Microsoft and Apple exhibit similar qualities.

Apple isn’t the world’s largest smartphone manufacturer, (that crown belongs to Samsung) but the company’s brand is one of the most valuable in the world, and consumers are willing to pay more to be part of the Apple ecosystem.

These companies are still at the top of their game. All that’s happened over the past year is growth expectations have shifted.

At some point their valuations will hit a level whereby the slower rate of future growth is fully reflected in the shares. When that happens, it could be the time to buy tech stocks.

It’s time to invest in Brazil, after last Sunday’s election win for Luiz Inácio Lula da Silva – “Lula” – the socialist candidate running for the presidency.

The country will benefit from the two major themes driving the world economy over the next two decades: the energy transition and global population growth.

Where to invest in Brazil

What excites me is the country’s booming export sector.

Put simply, Brazil makes what the world needs. And as our world is upended by the energy transition and rapid population growth, demand for Brazil’s goods will soar.

The world can’t fight climate change without Brazil. As pressure grows to slow global warming, more money will flow into the country. Its main asset is the Amazon rainforest, which is home to more biodiversity than anywhere else on the planet. A healthy Amazon rainforest would act as the planet’s lungs, absorbing huge quantities of CO2 and releasing fresh oxygen.

Under Bolsonaro, deforestation increased, which led some scientists to worry that fires in the rainforest were releasing more CO2 than it could capture. Lula has a proven record of combatting deforestation when he was last president and international donors such as Norway have already announced plans to resume funding Amazon projects.

Brazil’s next globally-significant climate-change asset is its mining industry. That might seem to contradict the previous paragraph, but Brazil’s iron ore and nickel are essential for the energy transition. Brazil has the world’s fourth-largest reserves of nickel – a metal that is used in electric-vehicle (EV) batteries.

At present the main use of nickel is stainless steel, as adding it to the mix helps make steel more resistant to extreme temperatures and corrosion, while batteries account for just 6% of overall demand for nickel. But financial data group S&P Global expects that to reach 35% by 2030 as electric-vehicle production jumps.

Invest in Brazil: a commodity powerhouse

Brazil is well established as an agricultural superpower; the country’s food production supplies 10% of the world’s population. It is the world’s largest exporter of beef, soybeans, sugar and coffee. It is also very near the top in corn, cotton and pork. Depending on how it is measured, agribusiness now accounts for 25% of the Brazilian economy.

The US Census Bureau estimates that the world population will hit eight billion in mid-November 2022. That will grow to almost ten billion by 2050 and 11.2 billion by 2100. Over the same period, an increase in extreme weather owing to climate change will adversely affect farming.

Of course, Brazil isn’t the world’s only breadbasket, but recent conflicts have shown that it is one of the most reliable.

Similar dynamics apply to energy. Brazil is the largest oil producer in Latin America and its production has climbed to three million barrels per day, from two million in 2012. Consultant McKinsey believes it could reach almost four million barrels per day by 2035.

Linked to both energy and food is Brazil’s biofuel production. Brazil is the world’s second-largest producer and consumer of biofuels. That was led by the sugar industry in the 1970s, but now modern biofuels can use a much wider range of feedstock, such as plant waste, dead animals and used vegetable oil. As the technology improves Brazil will be able to extract ever more value from its agricultural waste products.

Despite the country’s growing success, its stockmarket still looks attractive on a price/earnings (p/e) ratio of just seven compared with the MSCI Emerging Markets average of ten. That’s one of the most compelling reasons to invest in Brazil.

How to invest in Brazil today

Brazil’s national oil company, Petrobras (NYSE: PBR) has achieved record profits by divesting non-core businesses and concentrating on oil and gas production in recent years. It is likely that Lula will put pressure on the company to invest in more clean-energy ventures, which will be less profitable.

Nevertheless, other oil majors, such as BP and Shell, have already invested a far greater share of profits in renewable projects with less market backlash.

Petrobras has ten billion barrels of reserves and is likely to add more over the next few years as it continues to exploit its pre-salt discoveries.

Petrobras is extremely cheap, trading on a price/ earnings (p/e) ratio of just 2.8, compared with five for Shell and BP. It also pays a mega-dividend yield of almost 50%.

Agriculture accounts for around 27% of Brazilian GDP, yet agribusiness stocks make up just 4% of the local stockmarket. Fortunately, there are a few US-listed options that we can invest in. Adecoagro (NYSE: AGRO) is a South American agricultural giant whose offerings include rice, wheat, corn and dairy products across Argentina, Uruguay and Brazil.

However, the bulk of the business is its Brazilian sugar and ethanol operation, which accounts for 50% of sales and 70% of earnings before interest, taxes, depreciation and amortisation (Ebitda). Its biofuel production makes it an important part of the renewable energy story, while its food output is essential for a growing world population.

Another option is BrasilAgro (NYSE: LND), which produces beef, cotton, soy, sugar, ethanol and corn in Brazil, Bolivia and Paraguay. More than 80% of its land is in Brazil and soybeans comprise the bulk of its production. On a p/e ratio of 4.5 the company is a cheap way to buy into the long-term global food trend.

If you don’t fancy the risk of investing in individual shares, then the cheapest way to invest in Brazil is through an exchange-traded-fund (ETF).

With a total expense ratio (TER) of 0.74%, the iShares MSCI Brazil Ucits ETF (LSE: IBZL) offers a low-cost way to gain exposure to a diversified basket of Brazilian stocks.

If you prefer an actively managed Brazil fund, there are several available to UK investors. One to consider is HSBC Brazil Equity, which has a total expense ratio of 1.28% per year.

Remember to get your tickets for the MoneyWeek Wealth Summit hosted by Merryn Somerset Webb, on 25 November 2022! – we’ve got some brilliant speakers lined up and, given everything that’s going on, we’ll have an awful lot to talk about.

Book your place now at moneyweekwealthsummit.co.uk

The amount of money we are putting on our credit cards is steadily increasing as we seek to spread our rising expenses. But are you aware of the extra protection your credit card provides?

Under Section 75 of the Consumer Credit Act 1974, your credit-card provider is “jointly and severally liable” for your purchases. In practice this means that if you pay for something with your credit card the lender is just as liable as the company you made the purchase from if something goes wrong.

That means if the item you buy is faulty, broken or doesn’t arrive you can turn to your credit-card provider as they are legally required to help. It also covers services bought with a credit card such as flights, accommodation or a spa treatment. If the service isn’t provided your lender has to help rectify the matter.

You don’t even need to have paid the full bill for the item with your credit card. If you paid a deposit of more than £100 or less than £30,000, then your lender is liable to help.

For example, let’s say you buy a £20,000 car. You put a £500 deposit on your credit card and pay the rest directly from your bank account. Then the car dealership goes bust before you get your car. You can seek a refund under Section 75 from your credit card provider.

Exceptions to the Section 75 rule

However, there are limitations to your Section 75 protection. There must be a direct transaction between you and the retailer. If you pay via PayPal or Google Wallet, then you may not be covered by Section 75. That’s because you actually paid PayPal and they passed the money on to the retailer. The exception to this with PayPal is if the online store you are using relies on PayPal to process card payments. The way to tell the difference is that if you don’t have to log into your PayPal account you may be covered by Section 75.

The same exclusion applies if you buy via a third-party seller such as a travel agent or through Amazon Marketplace. You also won’t be covered by Section 75 if you use a “buy now, pay later” service such as Klarna. You must also have paid for an individual item and not several things from one retailer that add up to more than £100. And you can’t get Section 75 protection if you withdrew cash with your credit card and then used the cash to buy something.

If you are covered by Section 75 and something goes wrong, in most cases it will be easier to sort out the problem with the retailer first – but you are not obliged to do so. Keep a record of all communication and contact your credit card provider. They will want to know all the details of the transaction, why you want to make a claim and why you are turning to them rather than the retailer.

If your Section 75 claim is rejected, or it hasn’t been resolved in eight weeks, you can take your complaint to the Financial Ombudsman.

There have been rumours for years; there have been presentations, speculations, and occasionally even a minor product launch, but now it is finally happening: the technology giants are making their long-awaited push into healthcare.

As so often, Amazon led the way, paying $3.9bn for One Medical in the US, a primary healthcare organisation that covers almost 800,000 people across 25 states. For Amazon, it is a huge step up in its attack on the medical market. It bought online pharmacy PillPack for $750m in 2018 and since then has started selling through its own pharmacy as well. But this is the first time it has taken control of a major healthcare provider.

Apple has similar ambitions. Last week, the company set out its strategy for making healthcare its next major expansion, with devices, apps and services based around its existing products. There is speculation that it may make a similar acquisition to Amazon. Google has also targeted the industry, as has Meta. Healthcare is shaping up to be a major battleground for some of the world’s biggest and richest companies.

Eyes on the prize

It’s not hard to understand the attractions. In most countries, healthcare provision is inefficient and expensive, with outcomes that could be vastly improved. The sector could certainly use new technology and new ideas, in management and delivery as well as drugs and treatments. And it is a huge industry, accounting for 10% of GDP in most countries, and even more in the US. With populations ageing, it is only going to grow. Even a tiny slice of the market will be valuable.

The problem, however, is that this will take the tech giants into dangerous political territory. “The deal will expand Amazon’s ability to collect the most intimate and personal information about individuals, in order to track, target, manipulate and exploit people in ever more intrusive ways,” warns the Open Markets Institute, an organisation that campaigns for stricter competition regulation.

There is truth in that. It is one thing to monetise our record of browsing for new phones or holidays and then use that information to feed us advertisements or recommendations for different products. That happens all the time, and we more or less accept it as the price we pay for all the free products we get from the internet. It is a different matter to collect and manipulate our health records – there is a reason why doctor-patient relationships have always involved a degree of confidentiality. The tech giants can promise to respect that, but they have been so cavalier with the use of data in the past, and so reckless about finding ways of making money from it, that no one is likely to believe them.

It’s not like slinging books

The political scrutiny will be intense. Even in a relatively free-market system such as the US, the government is a major player and in just about every other developed country in the world it is the dominant force. It’s one thing to disrupt the market in books, music, clothes or food retailing – they are already very competitive markets – it is something else to open up hospital services, GP surgeries, or even pharmacies to new ideas.

On top of all that, doctors everywhere have formed themselves into the fiercest trade unions ever seen. None of them will give up any of their privileges easily, and they invariably have the public on their side. Governments are not going to sit back and see how the dust settles – they will stop the process before it has even started.

The reality is that, if the tech giants become major players, they will invite intense regulatory scrutiny and provoke a political backlash. Most of the major tech companies are already skating on very thin ice, with lots and lots of governments, regulators and activists demanding that they be broken up, that they pay more taxes, and that their power be curbed. Healthcare could easily be the tipping point: the moment when all that talk finally turns into action. It is not worth it – and if the likes of Apple and Amazon don’t get that they will have big problems in the years ahead.

The world’s most successful corporations prioritise customer service and have a long-term mindset. Amazon (Nasdaq: AMZN) is the classic example.

Over the past two decades the group has focused relentlessly on lowering costs for the customer and improving service to a level where it does not make much sense to go anywhere else. I know if I go to Amazon‘s website I can order pretty much anything and it will arrive tomorrow.

It is only able to do this because it has invested hundreds of billions of dollars in infrastructure to fulfil customer orders. It has prioritised long-term capital spending over short-term profits.

A company with similar qualities here in the UK is Telecom Plus (LSE: TEP).

A utility provide charting a course through stormy waters

For those unaware of the business, Telecom Plus supplies gas and electricity under its Utility Warehouse brand. Customers who take up both pay £50 below the government price cap.

While the company does not offer fixed-price deals, it does allow consumers to save money when they bundle together additional services such as home insurance, broadband and mobile services.

Utility Warehouse supplies my gas and electricity, and my bill tells me that I could save £80 a year by signing up for extra services. These services would cost around £40 a month, (according to the estimate on the bill) which is roughly what I’m paying anyway.

This is a great offer, especially when the cost of living is increasing so significantly. And it seems I’m not the only one who’s interested. Last year, Telecom Plus saw a 10% rise in customer numbers to 729,000. Management expects the group can win over a million new customers during the next five years as consumers look to bundle services and save costs.

As its share of the UK supply market is only around 2%, there’s certainly plenty of room for growth.

While other suppliers struggled last year, for the year to the end of March 2022, the company reported a 10% increase in adjusted pre-tax profit to £62m. Revenues came in at £967m, compared with £861m a year earlier. Management expects the bottom line to grow further this year. For the financial year to the end of March 2023, the group is projecting an adjusted pre-tax profit of £75m.

A long-term mindset has helped the company prepare

So how has Telecom Plus been able to grow in an environment that has seen a huge number of suppliers collapse? Its focus on the consumer is only one part of the equation. The other part is management’s long-term mentality.

CEO Andrew Lindsay worked at Goldman Sachs as an M&A banker before he joined the utility group in 2010. His background means he knows a thing or two about hedging risk, a key part of the utility supply business. Telecom Plus has an agreement with Eon whereby the German utility supplies energy at a permanent fixed discount to the UK’s retail price cap. Hedging and supply risks are all passed on to Eon.

The company has also learned the lessons of the past. Lindsay told City Insider last year that over the past 20 years of the group’s existence, it has seen several market cycles. “Energy markets are cyclical. We learned back in 2005 that you get wholesale price spikes. But everyone’s conveniently forgotten about that,” he said.

That’s why Telecom Plus has not only been able to navigate the crisis this time around, but it’s emerged bigger and stronger on the other side.

A defensive stock with plenty of growth potential

Based on Refinitiv analyst estimates the stock is trading at a 2023 price/earnings ratio (p/e) of 24, which is a bit on the pricey side. Nevertheless, considering the fact that the company believes it can more than double customer numbers over the next five years, I think it might be worth paying a premium for the stock. Shares in the utility group also support a dividend yield of 3.6% on a forward basis.

By taking a long-term approach to reducing risk and focusing on the customer, Telecom Plus has put itself in a great position to grab market share in a tough economic climate.

At a time when the outlook for so many other companies both inside and outside the utility sector is becoming bleaker by the day, the group’s positive growth outlook really stands out. It’s not often that utility suppliers show the hallmarks of a growth stock, but in my opinion, Telecom Plus does. Investors who’re looking for certainty in uncertain times might want to consider this one for their portfolios.

To say that 2022 hasn’t been a good year for technology stocks would be a bit of an understatement. Most of the leading names such as Apple, Amazon, Alphabet, Microsoft, Meta Platforms and Netflix have slumped. Netflix is now down nearly 75% from its peak. Lots more damage has been done outside the top names: the tech-heavy Nasdaq Composite index is down 30% from its highs and more than 45% of its constituents are down by 50% or greater.

Still, the Nasdaq remains far higher than it was before the start of the pandemic – it’s up by about 25% since the beginning of 2020. This raises the question as to whether a longer-term technology bear market has only just begun, or whether this is just a blip in a wider bull market and an opportunity to pick up technology shares at a cheaper price.

To understand what is going to happen in the future, it is important to understand what lay behind the very strong tech bull market of the last decade. “There have been two main fundamental drivers,” says George Boyd-Bowman of the Liontrust US Opportunities Fund. First, the rise of the digital economy has created a “powerful demand backdrop”. Many of today’s largest tech companies have been at “the forefront of providing the building blocks of the digital world as we know it”. Amazon and Microsoft created Amazon Web Services and Azure to allow the ongoing shift to the cloud. Google (now Alphabet) and Facebook (Meta) were the key forces behind digital advertising and social media.

At the same time, several new business models emerged. Many tech companies have reinvented themselves as platforms, offering a range of services. A prime example of this is Meta acquiring messaging service WhatsApp and photo-sharing app Instagram, in addition to Facebook, the core social network on which the company was founded. Another is the growing use of software as a service (SaaS), under which companies sell their products on a subscription basis, rather than in return for a one-off payment. These models have generated large margins and amounts of free cash flow, as well as extremely high levels of recurring revenue and potentially low levels of capital expenditure, says Boyd-Bowman. Investors tend to value this highly.

Beyond the technology

The long boom has been driven by some fundamental changes to the way we live and consume goods and services. But tech investors can’t ignore the fact that the sector has also been “supercharged” by “macro factors they couldn’t have predicted or indeed wished for in their wildest dreams”, says Boyd-Bowman. As well as Covid-19, which accelerated the use of e-commerce and remote working, these include an interest rate backdrop “supporting sky-high valuation multiples” and the “most benign market background conditions for fast growing companies” in a long time.

Indeed, the ultra-low interest rates created by accommodative central banks have been the big elephant in the room where technology is concerned, says James Penny of TAM Asset Management. This is because investors tend to value companies by their future cash flows, discounted to reflect how long these cash flows will take to appear. Since the discount rate is related to the interest rate, low interest rates “make future earnings a lot more valuable than they would normally have been under a more normal interest rate regime”. Throw in the fact that low productivity growth in the rest of the economy means that there are few alternatives for those seeking growth, and it’s not hard to see why tech shares became so attractive.

If low interest rates were one of the big reasons for the recent tech boom, then it’s only logical that interest-rate hikes by central banks now desperate to contain inflation are having the opposite effect, pushing down valuations and creating a “sour cocktail” for investors, says Boyd-Bowman. It’s significant that the big falls in tech shares have coincided with the “Fed pivot”, when the US Federal Reserve made it clear that it “was serious about getting on top of inflation” by choosing to start to hike rates. With the other major central banks, including the Bank of England, starting to follow, the days when near-zero bond yields led investors “to ascribe absurdly low discount rates to future revenue streams” seem numbered.

The removal of pandemic restrictions – while good for the rest of the economy – is another reason why tech stocks are falling, says Boyd-Bowman. This is because the return of people to physical shops and offices has caused the “Covid-induced sugar high” that it provided to certain companies to start to fade. Indeed, it’s become clear that “while many of the structural shifts that were in place before the pandemic are continuing to run”, they “aren’t necessarily going to do so at the supernormal rates we saw over the last couple of years”.

Why the market has soured

There’s also been a shift in investor expectations, says Penny. During the boom, many people “fell in love with the disruptive potential of these companies”, assuming that their success would continue, seemingly forever. This led investors to pile into them, driving up valuations to very high levels. However, in the past six months investors have started to become a lot less optimistic about the prospects of these companies.

Many of the biggest names of the boom period, such as Amazon and Netflix, have recently started to produce earnings and sales figures that have failed to meet the expectations of Wall Street analysts. As a result, many investors who have previously intended to stick with these companies in the hope of fast growth have decided “that now is a good time to take some of their profits while they can”, pushing down prices.

The big question is whether this decline will end up becoming a rout on the scale of the dotcom bust, where the Nasdaq lost three-quarters of its value between March 2000 and February 2003, or just another blip, followed by a quick recovery, like 2016, 2018 – or March 2020. Everyone agrees that much depends on investor sentiment – something notoriously difficult to predict. Anthony Ginsberg of GinsGlobal Index Funds is a relative optimist who doesn’t see this as a dotcom-era story, but “probably more similar to March/April 2020 at the start of Covid-19, when markets overreacted and panicked”. Markets are currently waiting to see whether the major central banks, such as the Federal Reserve, European Central Bank and Bank of England, are able to “successfully engineer a smooth landing this year”. Of these three, the US Federal Reserve is seen by technology investors as the most important. If the Fed is able to get US inflation under control, and do so without raising interest rates too high, then “sentiment on the US technology sector should improve, causing shares to rebound”.

Boyd-Bowman of Liontrust is also optimistic. He argues that while the lifting of restrictions has hurt many of the tech companies, it’s not on the scale of the dotcom bust where “the fundamentals of nearly every tech company imploded and many saw significant year-over-year revenue declines”. Meanwhile, the “Fed put” – the belief that the Fed would never let the stockmarket fall too far – has been replaced by a “private equity put”. Buyout funds are paying “healthy multiples” for some tech companies, says Boyd-Bowman. This year we’ve seen deals for virtualisation software firm Citrix ($16.5bn), cybersecurity and data-backup company Datto ($6.2bn), identity-management provider SailPoint ($6.9bn) and business-planning software group Anaplan ($10.7bn). This should help give investors confidence that the fundamentals are different this time, he argues.

Not everyone is convinced that there will be a soft landing. “This is like the start of the 2000-2003 tech crash,” says Jerry Thomas of Sarasin and Partners. Yes, the recent fall means that “valuations aren’t quite as crazy as they were during the dotcom era, and are much closer to fair value than they were only a few months ago”. It’s also fair to say that the companies in this tech boom “are much better than the 2001 vintage”. Still, history has shown that “negative sentiment tends to overshoot in the other direction”. What’s more, despite the market correction, there are still many “pockets of hype and expectation”.

Avoid the hype

There are a number of red flags that investors should note if they are looking for buying opportunities, says Thomas. For example, avoid companies “where the product they are selling is not differentiated from the competition, or where there are no barriers to entry”. This is especially important when it comes to mid-cap companies that lack economies of scale. Another big warning sign is companies that are “going on an acquisition spree outside their core areas in order to boost flagging growth rates” or are going through an “identity crisis”. However, perhaps the biggest group of tech companies to avoid is those with no real cash flow or earnings. These are still “super expensive”.

It’s not a good time to buy into companies where the investment case relies on earnings in the future rather than the present, “especially when the market is now focused on immediate profitability, and is much less forgiving of promises about the future”, agrees Neil Campling of Mirabaud Equity Research. And even companies that make money consistently might not be the best idea if they are still “priced for perfection”, as many still are. This is because they are not only likely to find that “any missteps... get punished hard”, but even if they meet their targets, they will suffer from “multiple compression” with investors simply less willing to pay huge multiples of current earnings.

In terms of specific sectors, Campling is particularly bearish about electric cars, where he thinks that there is a massive bubble. “Everyone in this area is now trying to become the new Tesla,” he says. That’s pushing down profit margins and leading to a lot of unproductive investment. What’s more, firms trying to enter this area are having to compete not just with other entrants, but all the major traditional manufacturers such as Volkswagen, General Motors and others, who have announced plans to move away from the internal combustion engine within the next decade.

A positive outlook for profitable firms

If Campling is bearish about shares that just promise fast growth without a clear plan for translating that into profits, he is much more optimistic about those which are not only currently profitable, but also have decent valuations. This is because this puts them at much less risk of investors cutting the earnings multiples they are willing to pay. The winning approach over the next few years can be best summed up by the idea of “growth at a reasonable price, rather than growth at any cost”, he says. And with inflation now a major worry, firms that “provide services enabling other firms to cut their costs” should do particularly well.

Investors are unlikely to go far wrong if they focus on “firms that will benefit from long-running themes which also have valuations that make sense”, agrees Thomas. While valuation is always subjective, one possible shortcut that investors can use to determine whether this is indeed the case is to compare a tech company’s share price with its position before the start of the pandemic in February. If the share price is at – or even better below – the pre-pandemic level, then this may be a good sign that it has not become overvalued as a consequence of the last two years, and may be worth considering as an investment.

In terms of specific sectors, cloud computing, the provision of data storage and IT services over the web, rather than on physical hardware directly controlled by the user, is one big theme to look at, says Ginsberg. The cloud-computing boom will also help boost demand for cybersecurity services, as not only are large American companies “shifting their IT spending increasingly to the cloud”, but they are also “demanding cybersecurity services be provided as part of any cloud-computing package”. What’s more, some of the big names in these sectors also stand to benefit from US government contracts in the near future.

It’s impossible to know how close we are to the bottom of this tech bear market. If the dotcom bust is any guide, there could be a long way still to go. However, the indiscriminate nature of these sell-offs means that long-term investors can usefully look for chances to begin buying profitable stocks, while leaving bottom-fishing in more speculative ones until later. We look at four that may already be interesting below.

Four tech stocks that still offer value...

Meta Platforms (Nasdaq: FB) owns the social network Facebook as well as a range of related apps, most notably the messaging service WhatsApp and the picture-sharing website Instagram. The company is now using some of the money generated by Facebook, which is an “incredible cash cow” says James Penny of TAM, to invest in the metaverse (a vision of a network of virtual worlds facilitated by virtual reality (VR) and augmented reality (AR)). While this investment “could end up falling on its face”, there are early signs that it “could be this generation’s Facebook”. Facebook trades at only 13.6 times forecast 2023 earnings.

Streaming service Netflix (Nasdaq: NFLX) has fallen a long way from its peak valuation due to concerns that the number of subscribers has peaked. However, there is still some value left in, reckons Neil Campling of Mirabaud, especially if it finds ways to cut down on password sharing, which has been blamed for allowing people to have a free ride on other people’s subscriptions. He also thinks Netflix could make money from developing computer games based on some of its hit series. Netflix trades at only 14.8 times forecast 2023 earnings.

Microsoft (Nasdaq: MSFT) should do well, thinks Anthony Ginsberg of GinsGlobal. He is particularly impressed by the way that it has become a “sizeable player in cloud computing”. At the same time, the company is also making moves into online gaming: it recently revealed that more than ten million people have streamed games over Xbox cloud gaming. The stock is more expensive than other blue-chip tech stocks at 23.6 times forecast 2023 earnings, but is showing strong growth. Sales have nearly doubled since 2016, and are set to keep growing at roughly 10% a year.

Cybersecurity firm Palo Alto Networks (Nasdaq: PANW) will continue to benefit from the surge in demand created by the move to cloud computing, says Jerry Thomas of Sarasin. It is particularly noted for its advanced firewalls as well as its automated security operations, and also provides security consulting services to companies. The shares are not cheap, even though they are down by around 30% from their peak, and still trade at 49 times forecast 2023 earnings. However, sales more than doubled between 2017 and 2021, and are expected to keep growing at around 25% a year.

... and two technology funds that do the same

If you want to invest in a broad portfolio of tech shares then HAN-GINS Tech Megatrend Equal Weight UCITS ETF (LSE: ITEP) might fit the bill. This has a portfolio of 114 companies in various fast-growing sectors, including cloud computing and big data, cybersecurity, social media, blockchain and digital entertainment. The companies in the portfolio are on an average price/earnings ratio of 22 and the ETF’s total expense ratio (TER) of 0.59% is reasonable.

If you want to focus on a specific theme, the HAN-GINS Cloud Technology Equal Weight UCITS ETF (LSE: SKYP) holds a group of 76 companies involved in the shift to cloud computing. It also has a TER of 0.59%. Equal weight means that a fund holds the same amount in each stock, rather than holding more in larger companies, like most indices.

Amazon (Nasdaq: AMZN) shares have slumped by around 36% since the beginning of the year. That compares to a 28% decline for the Nasdaq index.

Investors have dumped Amazon as part of the general shift away from pandemic-winners. But there’s more to it than that – Amazon is also facing growing challenges as consumer habits change.

Over the past two years, the e-commerce industry has reaped a windfall from higher levels of consumer spending and a lack of competition from brick and mortar retailers.

However, as the world has reopened after the disruption of the pandemic, consumer spending trends have normalised. That leaves e-tailers in a tricky position.

Companies like Amazon invested heavily in 2020 and 2021 to boost their delivery and order capacity, but it now seems as if this new capacity may be surplus to requirements. Amazon warned that its pandemic hiring and warehouse-building binge will hit profitability this year, when it reported its results for the first quarter of 2022.

Since then, two of its close peers, Walmart and Target, have echoed the same sentiment.

According to Bloomberg, Amazon is now reportedly looking to sublet at least ten million square feet of space and could “vacate even more by ending leases with landlords,” as it tries to unwind some of the excess capacity built up during the pandemic.

Getting these costs under control is vital if the business is to get back on track. Operating expenses hit $112.7bn for the three months to the end of March. To put that figure into perspective, sales in the quarter rose by just 7.3% to $116.4bn.

With revenue growth failing to keep up with cost growth, it’s not really surprising that Amazon reported a net loss of $3.8bn for the period (although this did include a non-operating expense of $7.6bn from its investment in electric carmaker Rivian Automotive Inc).

The profits may be vanishing but Amazon’s competitive advantages remain

These negative headlines haven’t helped investor sentiment towards Amazon. Analysts have questioned the sustainability of the firm’s retail business for the past 30 years, and the current issues are only serving to rekindle these concerns.

Still, retail has become almost a side show as Amazon’s cloud business has ballooned. Amazon Web Services (AWS), the cloud services division that generates virtually all of the group’s profit, reported a 37% jump in revenue for the period and an operating margin of 35.3%.

While the retail businesses generated an operating loss of around $2.9bn on sales of $98bn, AWS earned an operating income of $12bn on net sales of $18.4bn.

With AWS throwing off cash, Amazon isn’t a traditional retail story. It can afford to weather the current storm and management has time to reposition the enterprise for today’s tougher economic environment. It still expects income for the second quarter to range from a loss of $1bn to a profit of $3bn.

I’ve never owned Amazon shares – but I might change my mind

As a business, Amazon is fascinating. It has virtually taken over the e-commerce market in the US, and is making strong inroads in many of its international markets. It has grabbed market share by investing heavily to be the best operator, and is laser-focused on making the buying process as easy as possible for customers.

And as a consumer I love the business as Amazon usually has more on offer at a lower price with faster delivery times than its competitors.

However, as an investor I’ve never owned its shares. Yes, Amazon is miles ahead of the competition – but this doesn’t come cheap. The retail arm has always struggled to earn a consistent profit, and this doesn’t look likely to change.

I’ve found it almost impossible to understand how the company could produce returns for investors while losing money at its biggest division. Unfortunately, this hesitancy has caused me to miss out on some substantial profits. Amazon shares have returned 116% over the past five years, outpacing the FTSE All-Share’s paltry return of 0% excluding dividends.

Still, while I’ve avoided the business in the past, that does not mean that I will always do so. We’re entering an uncertain period, and one thing is clear – Amazon has the size and scale to ride out this turbulence, particularly with the AWS arm providing a vital stream of profits and cash flow.

Walmart and Target (among others) don’t have this competitive advantage. Amazon has the scope to capitalise on growing economic uncertainty and its large economies of scale in future, by offering consumers more for less and grabbing market share. At the same time, based on the growing pipeline of work for AWS, this division seems likely to continue to act as a profit centre.

So while Amazon shares may not be an outright “buy”, there’s certainly value emerging. The stock is likely to remain volatile as uncertainty persists, but it could emerge stronger on the other side of the current crisis. Investors brave enough to row against the tide may benefit from taking a long-term view of the business.

It’s becoming harder for streaming companies to grow as the race for eyeballs enters a new phase. After a decade of breakneck growth, Netflix (Nasdaq: NFLX), the poster child of the streaming boom, lost 200,000 subscribers in the first quarter, and is warning that it could lose a further two million in the second quarter as “revenue growth headwinds” weigh on growth plans. For comparison, it added 37 million subscribers in 2020.

Of course what the company means by “revenue growth headwinds” is that it’s facing more and more competition from the likes of Disney (NYSE: DIS), Amazon (Nasdaq: AMZN) and Warner Bros Discovery (Nasdaq: WBD), not to mention the plethora of other online streaming and video sites that have emerged over the past few years. Consumers are also starting to tighten their belts as the cost of living rises.

Consumers are starting to walk away from costly subscription packages

According to analytics group Kantar, UK consumers walked away from about 1.5 million video on-demand accounts during the first three months of 2022, a strong sign of the pressures Netflix and its peers are facing.

It’s also worth noting that, despite today’s news, Netflix, alongside Amazon’s Prime Video, actually has the lowest subscriber churn rates of any streaming services, suggesting that others are facing far higher cancellation rates.

With around 222 million subscribers, Netflix remains the world’s largest streaming service (Amazon comes a close second with 200 million Prime subscribers), but its size does not mean it is immune from the pressures facing the rest of the industry.

With content and market costs rising, the group is tapping its customers for extra cash, and this isn’t going down too well. Netflix recently increased its monthly price in the UK by an inflation-busting 10% (from £10 to £11) and in the US by 11% (from $14 to $15.50).

Price hikes in the US and Canada cost the company 600,000 subscribers, although the decision was still “revenue positive” for the business. Withdrawing from Russia after its invasion of Ukraine cost another 700,000 paying users (excluding this loss, the group actually added 500,000 subscribers in the first quarter, although this was still far below Wall Street expectations).

Spending on content spending has jumped as streamers compete for users

Netflix has long been criticised for its “growth at any cost” content strategy, which has put enormous pressure on its balance sheet, but it is not alone. Analysts estimate the firm will spend around $20bn on content this year, nearly double the $10bn it spent in 2020.

But this is just a fraction of the $230bn that will be spent on subscription video on demand (SVOD) content globally in 2022.

These numbers illustrate the scale of the challenges facing both the company and the wider sector. It needs to keep spending on content to keep its head above water, but to fund this spending it needs more money from subscribers – and some subscribers are clearly not willing to pay up.

That said, the company’s financial position is stronger today than it has been for years. It generated $800m in free cash flow in the first quarter, providing funds to reinvest in new content and cut debt. If it can repeat this performance for the rest of 2022, the group could generate $3.2bn of free cash flow this year.

Moreover, Netflix ended the first quarter with gross debt of $14.6bn after replying $700m of bonds in the period. After deducting $6bn of cash, net debt is a modest $8.6bn or 1.3x historical earnings before interest, tax, depreciation and amortisation (EBITDA).

The company is entering a consolidation phase

Netflix is looking to consolidate its position in the market. A plan is in the works to introduce an advertising-supported option, which will presumably have a lower cost, and the firm is going to crack down on people sharing their passwords. An estimated 100 million users piggyback off other subscriptions, so if the organisation can convert these into paying customers, it could become a vital source of revenue.

However, there is no guarantee these users will want to start paying for the service, especially with the cost of living, and a Netflix subscription, both rising.

The group is also going to be “pulling back on some of our spending growth across both content and non-content” over the next two years to control costs, as well as improving the “quality of our programming.” In other words, it seems as if the company is going to start focusing on quality over quantity when commissioning for new content.

Netflix’s critics have long believed Netflix will run into growth headwinds sooner or later, and it looks as if the streaming wars are finally starting to take their toll on the business.

However, the company does have the tools to deal with these challenges. Its vast content library, existing infrastructure and reputation will help it navigate uncertainty, not to mention its reputation among content producers, which the industry relies on to come up with ideas.

Still, from an investment perspective, the stock does not look particularly attractive, even after recent declines. Free cash flow of $3.2bn against a market capitalisation of $100bn suggests a free cash flow yield of around 3%. That’s on the pricey side for an ex-growth business, although it might seem cheap if the company can return to growth over the next few years.

In other words, if Netflix’s initiatives to cut debt, curb spending and draw more cash from existing customers start to pay off without too much subscriber attrition, then the company could have potential as an undervalued growth play.

Unfortunately, the chances are the business will continue to struggle as it battles to maintain its position in the global streaming market.

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Value is starting to emerge in the markets

“The trend is your friend,” according to the old investment adage. Nowhere is this more true than in the media and entertainment sector. The rise of streaming services such as Netflix and Amazon Prime Video, online video-sharing sites such as YouTube, and social-media platforms such as Facebook, Instagram and TikTok, has broken the vice-like grip that television broadcasters and cinemas used to have on our viewing habits.

At the heart of each of these internet-enabled services lies a simple but compelling “on-demand” offer – they allow us to watch what we want when we want. These global platforms grew more popular than ever during the pandemic, which accelerated the shift of viewing away from broadcast television and cinema.

Consider regulator Ofcom’s Media Nations research into the country’s viewing habits. Even though people watched more broadcast television during the pandemic, TV’s actual share of total viewing fell from 67% in 2019 to 61% in 2020. Ofcom also found that young people aged 16-34 are abandoning live TV. They spend more time each day on streaming services (91 minutes) and YouTube (72 minutes) than on watching live TV (65 minutes).

Teenagers abandon the telly

The figures back up a trend many of us observe in our home lives. Any family with teenagers will know that they hardly ever tune into live TV, preferring a diet of Netflix, YouTube and TikTok. Those who have put their money on this trend have done well. Netflix’s share price has gained around a fifth in the past year and 390% in five years. YouTube-parent Alphabet is up by 70% and 262% respectively.

Investors who have backed traditional media firms, however, have fared less impressively. Despite diversifying into production and launching its own streaming services – ITV Hub and BritBox – ITV’s share price has declined marginally in the past year, and by 45% in five years. Cinema operator Cineworld has slumped by a respective 50% and 87% over the same period. The big question now is whether you should follow the trend and back global video platforms, or bet that traditional players can bounce back and adapt to the age of online streaming.

The choice is not as straightforward as it might seem. Streamers such as Netflix are highly valued, with a price-to-earnings ratio of 54. There are signs that its growth may have plateaued after it aggressively added subscribers during the pandemic. In its core US and Canada market, Netflix only added 70,000 net paid subscribers in the first three months of 2021.

A frenzy of activity

The streaming market is also highly competitive. Technology and media analyst Omdia reckons there are now more than 5,300 streaming services around the world. The likes of Netflix, Disney+, Amazon Prime Video, HBO Max, Apple TV+, Paramount+ and Discovery+ are spending fortunes on content to make sure they are one of the handful of services that households are prepared to pay for. Netflix is investing $13.6bn on programming this year, funding expensive dramas such as The Crown and The Witcher, as well as action film Red Notice, starring Dwayne Johnson and Ryan Reynolds.

Not to be outdone, Disney plans to turbocharge its content spending next year. It has raised its content budget by $8bn to $33bn. A large proportion of this will be earmarked for films and series for its Disney+ platform. Discovery and WarnerMedia, which run the Discovery+ and HBO Max platforms respectively and are in the process of merging, plan jointly to spend $20bn on content.

In the face of competition from global streamers, British firms are adapting. The BBC, ITV, and Channel 4 each have compelling platforms of their own: BBC iPlayer, ITV Hub and All4. The BBC and ITV have also teamed up to launch BritBox, which offers UK programming highlights and is being launched around the world.

ITV recently said it expects to generate £1.95bn in advertising revenue in 2021 – a company record – on the back of a buoyant economy. Its production arm, ITV Studios, has also seen revenues rise as it capitalises on the demand for original content. It makes shows for an array of broadcasters and streamers, including BBC1’s Vigil, ITV’s The Long Call, Netflix’s Snowpiercer Season 2, Apple TV+’s Physical and HBO Max’s Ten Year Old Tom.

Cinemas too are attracting back growing audiences after the disastrous lockdown closures of 2020. Gower Street Analytics has predicted overall global box-office takings of $21bn for 2021, with top films including The Battle at Lake Changjin, No Time To Die and F9: The Fast Saga. The figure is still half of 2019’s total. But it is a 75% increase from 2020. Gower Street forecasts that box-office revenues will rise by another 58% to $33.2bn in 2022. Despite all this, analysts firmly believe that the leading global-streaming platforms will continue to dominate the media and entertainment market. “The future is streaming,” says Tom Harrington, head of television at Enders Analysis, a media and entertainment market researcher. “Video will all be online.”

Netflix cements its dominance

Maria Rua Aguete, Omdia’s senior research director for TV, video and advertising, forecasts that Netflix will still be the number-one streaming platform in 2025, with 255 million subscribers, up from 2020’s 204 million. Disney+ will be in second place with 248 million, and Amazon Prime Video third with 161 million.

She notes that Netflix is also expanding beyond video into video games and sales of merchandise related to its shows. Rua Aguete says that Netflix’s content spend isn’t the only reason for its success; the streamer is also highly skilled at partnering with telecoms groups and operators around the world to make the platform very easy to access for subscribers.

Netflix’s technology – from its recommendation algorithms to its user interface – is also considered better than rival versions. Furthermore, Netflix has recently shown signs that it is prepared to be flexible on price in order to gain subscribers.

Last month it announced that it was cutting its subscription costs by up to 60% in the price-sensitive and strategically important Indian market, where Disney and Amazon are currently ahead. Meanwhile, Enders Analysis predicts that the content arms race between the streaming platforms will soon show signs of easing as they shift from focusing on gaining market share to focusing on profitability.

“We think the perceived value of content is declining,” Harrington says. He explains that audiences are spending less on content than they have in the past and currently have much more choice. Audiences are also watching less long-form content owing to competition from short-form platforms such as YouTube, TikTok and Instagram. Streamers are therefore likely to cut the amount they spend on content in future years. Certainly, much of the streamers’ content spending seems wildly inefficient: many expensive shows are barely watched after their first thirty days on a platform. The logical conclusion of this argument is that if streamers spend less, the streamer-driven growth model of many content producers will also come under threat.

The top stocks in the sector

Market leadership, a strong content pipeline, cutting-edge technology, effective partnerships and global scale make Netflix (Nasdaq: NFLX) a good long-term bet. Netflix’s programming has been popular worldwide, and its strategy of investing in local content with global appeal – such as Korean hit Squid Game, French thriller Lupin and Spanish drama Money Heist – is paying off.

Walt Disney (NYSE: DIS) has impressed with the launch of Disney+. It has brought a direct-to-consumer streamer to market, pivoting away from profitably distributing its content through third-party channels and platforms. For a legacy media firm, it was a bold and transformative bet that has been well executed. Many within the industry are bullish about Disney’s prospects, pointing to its unrivalled content that appeals to young and older viewers alike. In addition to Walt Disney Pictures, it owns Pixar, 20th Century Fox, Lucasfilm and Marvel Studios.

YouTube parent Alphabet (Nasdaq: GOOGL) has thrived as younger audiences in particular watch more and more content on the video-sharing website. Advertising money has followed the eyeballs, allowing YouTube to raise advertisement prices. Traditionally, YouTube has scooped up advertising from smaller companies, while TV has been viewed as the key bedrock for campaigns by major brands. More recently, big brands are realising that a combination of digital platforms, such as YouTube, and TV is a powerful mix for reaching audiences.

Advertising revenues at ITV (LSE: ITV) are currently very robust and this looks set to continue into the first quarter of the year based on early booking indicators, according to Sarah Simon, an analyst at investment bank Berenberg. However, investors are sceptical about whether this is sustainable. With more competition than ever, total viewing at ITV is declining. Investors perceive that “the money will follow that decline”, says Simon. Berenberg recommends holding ITV.

Cinema chains such Cineworld and Everyman Cinemas have struggled to regain their pre-pandemic highs. Recovery in cinema-going seems to be taking longer than expected, and new Covid-19 variants have not helped; neither has the decision of Hollywood studios to cut the release window of big films to just 45 days before they appear on their streaming platforms. Other shares worthy of research include those of firms that supply the video platforms and content creators. In the UK, these include Zoo Digital (LSE: ZOO), which provides subtitling and dubbing services; Vitec Group (LSE: VTC), a supplier of production kit and software; and video-editing firm Blackbird (LSE: BIRD).

What’s happened?

Last Tuesday morning, for about an hour, some of the internet’s most visited websites were unavailable, including Amazon, Reddit, PayPal and Spotify. Also down were the BBC, The Guardian, the Financial Times, The New York Times and CNN. Perhaps most worrying, the UK government’s gov.uk domain was among those knocked out. The cause wasn’t any kind of malicious attack or conspiracy. Rather, it was the result of a single customer of Fastly – a San Francisco-based content-delivery network – updating their configuration settings, and unwittingly triggering a hitherto unknown bug in Fastly’s new software.

How could that take down Amazon?

Due to the way the internet has grown and changed as the amount of web data has ballooned. Specifically, it’s due to the rise of content-delivery networks (CDNs) – that is, cloud services that provide a worldwide fleet of servers to customers who cannot easily handle bandwidth spikes on their own. The purpose of CDNs (ironically enough) is to make the internet faster and more stable by letting users connect to servers physically close to them. Their main job is to provide “digital liquidity” – giving businesses greater geographical spread and proximity to customers, flexibly absorbing shocks and pooling the costs of maintaining spare capacity. Fastly is the fifth-largest provider globally. But there’s a paradox here.

What’s that?

The whole idea of the internet is built on decentralisation, and the resilience that comes from widely distributed risk. Yet the CDN model tends towards “market concentration because it depends on overwhelming bandwidth, economies of scale, expensive physical data centres and serious programming talent”, says Corinne Cath-Speth of the Oxford Internet Institute in The Daily Telegraph. The three biggest CDNs are Cloudflare, Amazon Web Services (AWS) and Akamai. Together they have around 89% of the market and all have suffered similar episodes since 2010. In this case, Fastly at least lived up to its name, getting 95% of the network back up and running as normal within the hour.

How much financial damage did it do?

Estimates vary wildly from millions of pounds to many billions. ParcelHero, the e-commerce delivery company, estimated that retailers across the UK, Europe and US will have lost around £1bn because of the outage. Counterintuitively, Fastly itself was not among those to take a hit. Although its share price dropped 5% as news broke of the issue, the share price ended the day up 11%. Investors were either impressed by the swift resolution, or maybe those who hadn’t heard of the firm before liked what they saw. But either way, the whole episode has heightened worries about the inherent vulnerabilities of the internet.

Is this just a commercial issue?

No, it’s a security and geostrategic issue too. If the Fastly farce “makes the modern internet sound alarmingly like a house of cards built on shaky foundations, that’s because it is”, says James Ball on CapX. The services, like Fastly, that keep the network operating behind the scenes “have long chains of dependencies – one service might draw on code from another site, that in turn relies on open-source code libraries that may or may not have been kept updated for decades”. This architecture makes big firms vulnerable to internet breakdowns. But it also means that malign actors – state or otherwise – have no shortage of targets. “A country wanting to launch a military operation against a neighbour could, for example, launch massive cyberattacks to take out much of the internet... Others might take down the internet for fun, or for profit.”

How big a threat are such attacks?

Big and getting bigger. Ransomware attacks have surged by 60% over the past year, with recent high-profile targets including Ireland’s health service and Colonial Pipeline in the US, which exposed the risks to critical energy infrastructure in the world’s biggest economy. Moreover, the average ransom payment has roughly doubled over the past year, according to Coveware, a tracking firm. Here in the UK, the nation’s cyberdefence chief has warned that criminal hackers carrying out ransomware attacks now pose a bigger risk to UK national security than online espionage by hostile states. In a speech this week, Lindy Cameron – chief executive of the National Cyber Security Centre, a branch of GCHQ – discussed the very real threats to business and security from state actors including China, North Korea, Iran and Russia. But for most people and businesses – including suppliers of critical national infrastructure and government services – “the primary threat is not state actors but cybercriminals”, says Cameron.

What can be done?

Ransomware is obviously separate from the issue of structural vulnerabilities exposed by the Fastly affair, but both are about threats to internet infrastructure robustness. On the ransomware issue, says the ex-MI6 boss Alex Younger in the Financial Times, it’s clear that many of the key groups are based in Russia, and are tolerated as long as they don’t threaten Russian interests. Thus, part of the solution involves getting President Putin to own the problem, using the “full range of geopolitical carrots and sticks”. Second, governments should discourage the payment of ransoms, make it compulsory for such payments to be disclosed, and must upgrade their anti-money-laundering capabilities for the age of cryptocurrencies. On the wider infrastructure issue, says John Villasenor of the Brookings Institution, government should promote diversification in the number and types of firms providing infrastructure services. There’s been an intense government focus in recent years on visible parts of the internet ecosystem. Henceforth, policymakers must be equally focused on the bits of the internet we don’t normally see.

It’s been a barn-storming year for the Canadian e-commerce platform Shopify. Its shares more than tripled during the pandemic, taking its market value to a peak of $180bn in February, notes the Financial Times. Although still widely unknown to the general public, Shopify’s services – which allow brands and independent stores to sell directly to customers through their own websites or via social-media platforms – have been embraced as an alternative to trading through Amazon or other large marketplaces. Total spending by consumers on the 1.7 million merchants that use Shopify grew by 99% in the last quarter of the year.

Beyond the plumbing

Doubtless the backlash against the might and perceived monopolistic tendencies of Amazon has helped. But Shopify has also thrived on word-of-mouth during lockdown – as a hassle-free way for restaurants and independent shops to set up an online presence quickly while their premises were closed. The favourite statistic of the company’s president and driving force Harley Finkelstein, 37, is that “every 28 seconds, a new entrepreneur makes their first sale on Shopify”, says The Times. The only thing the customer sees is a “Shop Pay” logo flashing up at the checkout. Finkelstein relishes the anonymity. “We are intentionally not front and centre. We exist only to make merchants looks really good.” That said, his ambitions stretch far beyond technological plumbing. “Google is the search company. Facebook is the social company, but no one is the entrepreneurship company,” he says. “We’re not there yet – but we have the best shot at it.”

Entrepreneurship is a favourite theme of Finkelstein’s – not least because his own father was a failed serial entrepreneur. Born in Montreal, he was “a child of immigrants” – his father and grandparents, who were Holocaust survivors, immigrated to Canada from Hungary in 1966. Finkelstein has unreserved admiration for his grandfather who “spent his entire life selling eggs at a farmers’ market… and he never even liked eggs. But he put food on the table and a roof over their heads. And that allowed me to live this life.”

Finkelstein’s own father was also a positive influence on his youthful ambitions, says The Times. Although he couldn’t provide much in the way of business advice or financial leg-ups, “he would regularly print stacks of business cards for Finkelstein’s early business ventures”, which included a T-shirt company founded when he was a 17-year-old student at McGill University.

His proudest moment

Finkelstein initially seemed headed for the legal profession: his first job was at a Toronto law firm. But his life changed abruptly in 2009 when he met Tobias Lütke, a German-Canadian entrepreneur who had co-founded Shopify in Ottawa in 2004 as an online snowboard shop. The company’s founders had baulked at allowing marketplaces like eBay and Amazon to “own” their customers, so had written their own software. Finkelstein was hired as the company’s “chief platform officer”, with the brief of expanding the tech side of the business. He had no idea then quite how exponential that expansion would be, but cites his proudest moment as taking Shopify public in New York in 2015.

After a year of unbridled growth, Shopify now looks to be at a crossroads, says MarketWatch. Some are sceptical about its prospects “as the pandemic fades” and the froth around tech stocks subsides – Shopify’s shares have tumbled 28% since February. Finkelstein is certain that his pitch about liberating the inner entrepreneur in all of us has legs. But, given the possibly stomach-churning ride ahead, he will need all the resilience he can muster.

When it comes to taxes, the tech giants – Amazon, Google, Facebook and Apple et al – have for over a decade now made Western governments look like fools. Heck, even Starbucks has. Their globalised business models, with IP here, trademarks there, profits somewhere else, have meant that they can pretty much pay as little or as much tax as they see fit, and there is not a lot governments have been able to do about it.

Tax systems, bound by national borders and designed around the physical economy, have been exposed for the antiquated megaliths they are. Local individuals and companies have been burdened with heavy taxes so that governments can subsidize their out-of-control spending. The globalised digital behemoths on the other hand have got away almost scot free.

Well, if you thought governments were unprepared for the disruption brought to their revenue models by the tech giants of the 2000s and 2010s, wait till you see how unprepared they are for “decentralised autonomous organisations”, aka DAOs. I’ll bet you less than 5% of government ministers even know what a DAO is. Nevertheless, the 2020s will be the decade of the DAO.

What is a DAO?

When “Satoshi Nakamoto” designed bitcoin, one of his key aims was to create a money system that had no central point of failure. Previous alternative money systems, he argued, such as Digicash and Digigold, had failed because there was a central company, a central office that could be shut down. Once this central point was shut down, the system came tumbling down with it.

So, intrinsic to bitcoin’s design, was that the system functioned on a distributed network – on multiple computers in multiple jurisdictions around the world. You might be able to take out one or more computers or nodes on the network, but you couldn’t take them all down. And it is the combined power of all the machines operating on the network that makes bitcoin so formidable. A government can make bitcoin illegal, but the computer power required to take down the network is so immense that it is almost impossible. This was Nakamoto’s blockchain.

Now organisations are following the same model. With DAOs, like bitcoin, there is no central body to close down or tax. These organisations operate on distributed blockchain networks with no company HQ, no formal organisation at the centre, no base in any jurisdiction and no central point of failure. Their currencies are their own issued tokens; digital, existing outside fiat economies. Their platforms and businesses will be automated by code, often written on an open-source basis.

Governments are trying to impose taxes, censorship and other rules on the likes of Facebook, Twitter, YouTube, Uber and AirBnB. How will they do that to the social network, the video-, ride- or flat-sharing platform is decentralised? Many of the often highly libertarian developers in the blockchain space have even stated that their intention with DAOs is to replace the state altogether. If they deprive it of essential tax revenue, they’ll go a long way to doing that.

There are many reasons tech stocks have been able to grow at the phenomenal rate they have since the late 1990s. One has been the incredible product or service they have been able to offer – Google’s search engine, Apple’s phones and computers, Amazon’s shopping and delivery. Another has been the sheer scalability of digital tech – Google can make a change to its search engine and billions benefit; a brilliant app need only be uploaded once, but it can be downloaded billions of times.

But also, with valuations based as much on users as on profits, tech companies have not been held back by the heavy taxes imposed on the physical economy. Not having to leak capital to the tax man, means they can reinvest in their own companies, develop quicker and better products and then offer them to customers cheaper. Well, these same three factors all apply to DAOs, only on steroids. DAOs are going to be huge.

How to invest in DAOs

Picking out individual opportunities is a lottery. If this were the dotcom boom, we would be in about 1997. We haven’t even had the first proper hype cycle yet. Google and Facebook haven’t even been invented, and Amazon is still only selling books. The tech is still highly experimental and we just don’t know who the winners will be. I couldn’t begin to start singling them out, though I do know they are there.

There isn’t a Nasdaq exchange where they all list – they won’t even list on an exchange – nor is there an exchange-traded fund that tracks them. But the future multi-national, trillion-dollar behemoths are all lurking somewhere in the cryptoverse.

There are products that track baskets of coins and products, but even singling these out is a minefield. Familiarizing yourself with the decentralised exchanges, where these products are traded will take several days of learning.

But make no mistake – decentralised tech is the opportunity of the next decade. If you’re a youngster setting out on a career, go and look for opportunities there. You could make a lot of money in just a few years.

And if you’re an oldster, researching investment opportunities, you know where to look. But remember it’s the Wild West. There will be huge winners, but most projects will go the way of dotcom.

Perhaps one vehicle is to look at the coins on which many of these platforms will be built – the likes of ethereum, cardano, polkadot. I have a fondness for a little known coin by the name of decred (short for decentralised credits), which you can buy at crypto exchanges such as Binance, Poloniex and Bittrex.

Why do I like decred? It’s under-hyped and the dev team is superb. There are perhaps thirty or forty exceptional developers in the space. Six of seven of them work on bitcoin. A good three or four of them are in decred. When you have no idea which horse is going to win, betting on the stable, trainer or jockey is often not such a bad strategy.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

The fight to dominate, or at least get a slice of the lucrative and fast-growing cloud-computing market is where the real action is in the technology sector. We might think of technology more often as, say, social media, e-commerce, or film and music streaming. But none of this works without the cloud, which is why some of the leading names in the industry are spending big bucks to try to dominate the sector.

The cloud is that vast array of ever-expanding data centres where information is remotely stored, analysed and used by businesses; they find this cheaper and more practical than building their own.

They get access to significant processing power, which means their apps can, for instance, allow every customer to check their bank balances and make payments simultaneously, accommodate millions of active social-media users at once, or allow someone to make a live speech watched by hundreds of virtual conference guests all over the world.

And as there is no limit to what people might want their devices to do in the future, immediate cloud accessibility is key to businesses being able to innovate and scale up rapidly in response to new demand.

Deep pockets required

Building these data centres requires deep pockets, which excludes all but a few participants. In the lead is Amazon, which has invested billions to gain a 32% share of the cloud, according to data provider Synergy Research.

Microsoft is next at 20%, fiercely pursued by Google-owner Alphabet and China’s e-commerce giant Alibaba with 9% and 6% respectively. These high-fliers have, however, created such big cloud-related expectations that their shares have rocketed, putting many investors off.

An alternative way to get exposure to the cloud is through some of the legacy tech companies. These have often been around for decades making money from pre-cloud systems still in use today, while also trying to build a presence in the cloud. Their shares can be much cheaper. Legacy tech is not investing enough to catch up and dominate the cloud, but these companies could build secure niches by selling into their big, global customer bases. When stocks written off by most analysts begin to surprise positively, shareholders can be richly rewarded.

Hidden value

It is, therefore, worth looking at global tech giant Oracle (NYSE: ORCL). The stock is on a discount to the tech sector. Sales growth has been slow for years and earnings per share heavily boosted by share buybacks. It’s a classic “value” stock – one perceived to have unappreciated potential that could be unlocked if investors revised their view of the group’s prospects, or a catalyst highlighted its scope for growth.

That catalyst could be the cloud. Oracle is at the forefront of business database systems, with nearly half a million corporate customers in 175 countries. And it’s a leader in the software solutions that businesses need to work with this data, whether it’s financial control or human-resources management.

Oracle has, therefore, the experience and capability to get businesses onto the cloud, building secure, robust systems and integrating its software to support them. It has been slow to the party and to succeed it needs to make up ground fast.

But it has been winning business from companies as diverse as Latin American McDonald’s franchisee Arcos Dorados, tobacco group Altria, retailer Bed Bath & Beyond and IT group Micro Focus. With only 10%-20% of companies having migrated to the cloud so far, there’s still plenty of untapped opportunity to capitalise upon.

Slick, efficient and globally indispensable

Oracle likes to trumpet the fact that its financial management is so slick that this $220bn company with $40bn in annual sales and 136,000 employees can close its books and report its earnings within just ten days.

It’s quite a feat that perhaps helps understand why the group has come to be widely used by businesses globally. From its beginnings in the 1980s with its focus on databases and software for enterprises, Oracle has built a strong presence with 430,000 corporate customers (it doesn’t sell to individuals).

The key question is how well Oracle shapes up as cloud computing grows and ultimately replaces older, in-house computer networks. If it fails to capitalise on the opportunity, then it will be confirmed as a business in slow decline. Given that the shares are cheap, a punt on success could pay off, but this is not a stock for the risk-averse.

The cloud sector is fiercely competitive. However, Oracle is no newcomer to delivering systems to businesses. It can build its cloud offering around this speciality and accompany it with its broad suite of applications.

The latest quarterly results saw the group beat expectations, but it was cautious about the outlook. Profits rose by 10% year-on-year. It doesn’t break down in detail how much revenue comes from cloud activities, but at the product level, the talk is positive. It lifted sales by 30% in the quarter, for example, for its cloud-based day-to-day planning software for organisations, an area where it is considered the market leader. And its cloud infrastructure offering saw sales rise by over 100%. Some positive noises from analysts have helped the shares rise 17% so far this year, well ahead of the market. But they remain cheap and appealing for patient investors wary of the stratospheric valuations of other tech plays.

Stephen Connolly heads a family investment office and has worked in investment banking and asset management for over 25 years (sc@plainmoney.co.uk).

We are in the middle of an unprecedented technology boom, especially in the US, with the tech-heavy Nasdaq Composite index doubling in just over two years. Of course, this is not entirely irrational. For example, some companies, notably Facebook, Google and Amazon, have managed to deliver on the promises made over a decade ago.

Low long-term interest rates have also increased the value of future profits, while a case can be made that the pandemic has accelerated genuine long-term changes in the way that we shop, consume goods and services, and work.

Nevertheless, several stocks have surged so far that it seems investors are willing to throw lots of money at anything that looks vaguely plausible. Perhaps the most egregious example is data company Snowflake (NYSE: SNOW), the largest initial public offering (IPO) of 2020.

When its backers announced that they were taking it public, brokers expected it to be priced at $75 a share. However, demand was so great in the run-up to the listing that the shares were ultimately priced at $120. On its first day of trading it opened at double that amount. The price then continued to rocket, gaining 50% to a peak of $375 last month.

Snowflake’s sales doubled in 2020

Snowflake is a cloud-computing company. It makes most of its money from software that allows companies to store and analyse large data sets remotely. The idea is that in a world where everyone is working from home, or small offices, such storage and analytic services will be in demand.

Sales more than doubled last year and are expected to double again in 2021 – and again in 2022. Snowflake is also notable for having attracted initial funding from Berkshire Hathaway, the holding company run by the famous US investor Warren Buffett.

This all certainly sounds compelling, but if you look a bit more closely, the stock appears much less attractive. While cloud computing is a genuinely big investment theme, Snowflake faces strong competition from a range of operators, including large, established players such as Amazon (which dominates the market through Amazon Web Services).

Not only has Snowflake failed to make money so far, but it will also have an uphill struggle to justify a valuation of over 200 times 2021 sales. Warren Buffett’s endorsement looks far less impressive when you remember that he made his reputation by investing in cash-generating companies in strong, established sectors, not moonshot technology companies.

It now appears that even Snowflake’s cheerleaders are beginning to tire of the company, with the price melting down by 20% in recent weeks to the current level of $306. Still, I would advise you to wait just a little longer, shorting the stock at £7 per $1 when it falls below $280. In that case, I suggest you cover your position if the share price rises above $420, which gives you a potential downside of £980.

Trading techniques: the Super Bowl indicator

Last Sunday saw the Tampa Bay Buccaneers beat the Kansas City Chiefs in the 55th Super Bowl. Traders who believe in the Super Bowl indicator will be pleased.

This is because the indicator suggests that the US stockmarket tends to perform better after a team from one of the two key leagues, the National Football Conference (NFC), beats a team from the other, the American Football Conference (AFC) in the big game. Since Tampa Bay is in the NFC, this should be good news for equities.

There does seem to be something to this theory. According to Russ Mould of AJ Bell, on the 27 occasions teams from the NFC won, the stockmarket returned an average of 10.5% in the following year – but an average of only 6.9% a year after the 27 AFC victories.

However, Mould points out that this may be because the AFC teams were dominant during the 1970s when stagflation depressed stocks, while teams from the NFC won 13 consecutive Super Bowls during the bull markets of the late 1980s and 1990s.

What’s more, those who have placed their trust in Super Bowl theory have done badly over the last 20 years, with the market returning 9.17% on average after AFC victories, compared with only 2.76% after NFC wins. The main lesson is to ignore theories and indicators without an underlying financial rationale.

How my tips have fared

Four of my five long tips have gained in the past fortnight. Media group ITV went up from 102p to 108p and transport group National Express rose from 244p to 301p.

Pub group Mitchells & Butlers increased from 277p to 348p, while cruise-ship company Norwegian Cruise Lines climbed from $23.97 to $25.01. However, while building company Bellway advanced from 2,803p to 3,114p, it briefly fell below the stop-loss level of 2,750p, so you would have had to close it there, taking profits of £780. Still, even excluding the profits on Bellway, my four longs are making a total net profit of £5,610.

The short tips were more of a mixed bag. Online insurance broker eHealth slipped from $82.97 to $57.37. Electric lorry-maker Nikola advanced from $20.74 to $23.50. Online furniture retailer Wayfair fell from $294 to $289. Social-media network Twitter increased from $48 to $58, which meant that you would have covered your position at $56.20 for a loss of £980.

Online grocer Ocado fell from 2,800p to 2,688p, and food-delivery platform DoorDash decreased from $191 to $177. GameStop hasn’t yet fallen below $50, the level at which I suggested you start shorting it. Overall, excluding Twitter, my short tips are making a profit of £1,485.

The closure of Bellway and Twitter leaves me with four long tips (ITV, National Express, Mitchells & Butlers and Norwegian Cruise Line), and five shorts (eHealth, Nikola, Wayfair, Ocado and DoorDash), with GameStop and Snowflake yet to be triggered. I suggest you close your Wayfair short, since it is losing money after more than six months, taking losses of £161. Raise the stop- losses on National Express and Mitchells & Butlers to 275p and 300p respectively.

In a “surprise move”, Amazon announced last week that its founder Jeff Bezos is stepping down as CEO, says James Titcomb in The Daily Telegraph. Bezos will move to the role of executive chairman in the third quarter of this year, allowing him “more time for interests in other areas”. Andy Jassy, the current head of Amazon’s successful cloud-computing division, will replace Bezos as CEO. The announcement came as the company posted record sales, surpassing $100bn in a single quarter for the first time as it benefited from lockdowns that have “pummelled physical retailers”.

Bezos won’t disappear, say Nils Pratley in The Guardian. As chairman he “will still run the board” and have “freedom to roam wherever he wishes”. If Bezos and Jassy disagree, “everybody knows who will prevail” given that Bezos “owns 10% of the shares”. The move may be a largely cosmetic device to enable him to “avoid the next grilling in front of US lawmakers” over Amazon’s treatment of small businesses, workers or anti-trust issues. With Bezos still making the big corporate decisions “real change at Amazon may be hard to detect”.

The “everything store”

Investors should certainly not expect the business model of the so-called “everything store” to change radically under the new management team, says Lex in the Financial Times. Not only will Bezos still “oversee the business” in his new role, even after his departure, but his replacement is also hardly someone who will look to shake things up. Jassy “has been with Amazon for 24 years, joining straight out of Harvard Business School” and is both a “loyal employee and successful business developer”.

Still, things are unlikely to remain completely the same, says Jim Armitage in the Evening Standard. The move “could signal a shift in the group’s focus towards more business-to-business operations”. Jassy has successfully run Amazon Web Services (AWS), which now “powers around 45% of the world’s cloud-hosted websites”. AWS was already “the biggest profit generator at Amazon before lockdown”, but with the restrictions driving businesses “to digitise their systems and power them remotely through the cloud”, it has “grown massively since”. There have even been rumours that AWS could be split from the company, though Jassy’s elevation makes this unlikely.

AWS has been “one of Amazon’s jewels”, booking “more than half of its operating profit despite accounting for just 12% of total sales”, says Jennifer Saba on Breakingviews. But it must keep growing fast as the rest of the business faces increased pressure. Operating costs shot up by 42% in the fourth quarter “because costs associated with worldwide shipping rose about two-thirds”. It expects sales volumes to drop by 25% this quarter compared with the previous three months as vaccines and the end of lockdown create more choice about where to buy goods.

1. The price of which cryptocurrency jumped after Tesla chief Elon Musk tweeted messages in apparent support of it?

• a. Bitcoin
• b. Dogecoin
• c. Litecoin
• d. Tether

2. Which tech giant posted quarterly sales figures of over $100bn for the first time for the last quarter of 2020?

• a. Microsoft
• b. Twitter
• c. Apple
• d. Facebook

3. “Buy now, pay later” services are facing regulation after a report revealed that users have racked up £2.7bn in debt. The sector has been subject to controversy for allowing users to spend over £1,000 with few checks on whether they can afford repayments. Which company is the market leader in the UK?

• a. Klarna
• b. Laybuy
• c. Clearpay
• d. Afterpay

4. The CEO of which major tech company announced he would be stepping down to become executive chairman, focusing instead on personal climate-change initiatives, space exploration, and the newspaper he owns?

• a. Reddit’s Steve Huffman
• b. Facebook’s Mark Zuckerberg
• c. Apple’s Tim Cook
• d. Amazon’s Jeff Bezos

5. The UK passed a vaccination milestone this week, having inoculated how many people?

• a. 5 million
• b. 15 million
• c. 10 million
• d. 20 million

6. Shares in Chinese video-sharing app Kuaishou jumped nearly threefold on their first day of trading in the Hong Kong Stock Exchange, propelling its valuation to $160bn, closing in on main rival Bytedance, owner of TikTok. It raised $5.4bn in its IPO, the biggest tech flotation since which company’s IPO in 2019?

• a. Uber
• b. Lyft
• c. Alibaba
• d. XP Inc

7. Which bank reported a positive quarter in the three months to December following three years of losses?

• a. Halifax
• b. Nationwide
• c. Virgin Money
• d. NatWest

8. The Indian government accused celebrities of “sensationalising” the farmers’ protests that have been taking place in Delhi for over two months after which famous singer with over 100 million Twitter followers tweeted about it?

• a. Kim Kardashian
• b. Rihanna
• c. Cher
• d. Celine Dion

9. The oil industry is still recovering from the effects of the pandemic. Despite a plunge in earnings to its lowest in 15 years, which oil company raised its dividend?

• a. BP
• b. Exxon
• c. Chevron
• d. Royal Dutch Shell

10. The UK is applying to join a trading bloc of 11 Pacific Rim nations, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Which of the following isn’t part of the CPTPP?

• a. Mexico
• b. New Zealand
• c. South Korea
• d. Peru

Answers

1. b. Dogecoin. Dogecoin is a minor cryptocurrency, created as a joke to satirise digital currencies. Its price rose 47% within minutes of Musk’s tweets, from about four cents to as high as 5.9 cents before settling back to 4.7 cents. It is named after the popular meme of a Japanese dog.

2. c. Apple. For the three months ending on 26 December 2020 Apple posted sales of, $111.4bn with a profit of $28.7bn, 29% higher than the same period last year.

3. a. Klarna. The Financial Conduct Authority announced this week it would be regulating the sector, which allows users to skip payment at checkout and repay interest-free later. Consumer campaigners have spent months demanding the sector be regulated amid fears shoppers were being encouraged to spend more than they could afford.

4. d. Amazon’s Jeff Bezos. Bezos announced the move this week. His successor will be Andy Jassy, who currently heads Amazon’s web services. The transition will take place in the third quarter of 2021.

5. c. 10 million. Around 15% of the population has received the first dose of the vaccine just under two months after the programme began.

6. a. Uber. Minicab app Uber raised $8bn when it floated in 2019.

7. c. Virgin Money. Chief executive David Duffy said the lender had enjoyed a profitable first quarter in the three months to the end of December but did not provide a profit figure.

8. b. Rihanna. The singer’s tweet was liked over half a million times and inspired other celebrities to lend their support. The Indian government has insisted the protests are an “internal matter”, adding celebrities lacked “a proper understanding of the issues”.

9. d. Royal Dutch Shell. The oil major reported an annual loss of $21.7bn, but it decided to raise its dividend for the second time in recent months after a dramatic cut to the payout last April dragged it down by two-thirds to 16 cents. It raised its dividend to 16.65 cents in October, and will raise it to 17.35 cents in the first quarter of 2021.

10. c. South Korea. The CPTPP was formed in 2018, with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam as founding members. CPTPP nations made up 8.4% of UK exports in 2019, around the same as exports to Germany.

1. Wrexham Football Club is set for a £2m investment after it was bought by Hollywood stars Ryan Reynolds and Rob McElhenney. Ryan Reynolds is famous for playing Deadpool in the Deadpool movies. But which sitcom is McElhenney known for, especially in the United States?

a. Friends,

b. It’s Always Sunny in Philadelphia,

c. Two and a Half Men,

d. Seinfeld

2. US president-elect Joe Biden is set to nominate Janet Yellen to become the next Treasury secretary. If elected, Yellen will become the first person to have headed three major US economic organisations. Which of these has she not taken charge of?

a. Federal Reserve,

b. White House Council of Economic Advisers,

c. Federal Trade Commission,

d. All of the above

3. Alex Bourne, 36, won a government contract worth at least £30m for supplying vials for coronavirus tests. But what was his relationship to health secretary Matt Hancock?

a. Brother-in-law,

b. Cousin,

c. Neighbour,

d. Schoolfriend

4. Which company announced this week it would be spending $500m on Christmas bonuses for its staff after its success throughout the pandemic?

a. Amazon,

b. Zoom,

c. Netflix,

d. PayPal

5. Research by consumer group Which? found what when tracking the prices of 219 popular home and tech products for six months before and after the 2019 Black Friday sale?

a. Nine out of ten items were 25% cheaper on Black Friday,

b. Nine out of ten items were 33% cheaper on Black Friday,

c. Nine out of ten items were the same price on Black Friday as they were two weeks before,

d. Nine out of ten items were available for the same price or cheaper earlier in the year before Black Friday

6. Co-op shop workers received what this week to help monitor increasing levels of abuse towards towards them in a £70m effort by the supermarket to boost security measures?

a. Self defence training,

b. Body cameras,

c. Emergency whistles,

d. Portable alarms that ring 999

7. The UK economy is set to end the year 11% smaller than it was expected to because of the effect of the coronavirus pandemic. GDP is expected to remain 3% smaller by which year?

a. 2021,

b. 2023,

c. 2025,

d. 2027

8. Aberdeen Standard Investments, one of Europe’s biggest asset managers, is to launch a fund solely investing in hedge funds run by who?

a. Women,

b. Fund managers from ethnic minorities,

c. Fund managers under 40,

d. Fund managers with at least 20 years of experience

9. Bitcoin rallied to a new record high this week, trading as high as $19,510 after seeing a 75% increase in the past three months and recovering 400% since its heavy drop in March. What happened last time it hit a peak?

a. It plateaued,

b. It lost 80% over one year,

c. It went on to hit record highs for three days in a row,

d. Investors sold their Bitcoin en masse to make a profit

10. Tesla’s market value increased to over $500bn this week following a fresh wave of buying, prompted by what?

a. Elon Musk’s announcement that Tesla was going to diversify into vaccines,

b. Its very impressive half-year report,

c. Elon Musk’s overtaking of Bill Gates to become the world’s second richest person,

d. Its debut on the S&P 500 stock index next month

Answers

1. b. It’s Always Sunny in Philadelphia. McElhenney created the show and played Mac, which follows a group of friends who run an Irish pub.

2. c. Federal Trade Commission. Yellen was head of the Federal Reserve under President Obama and President Trump from 2014 to 2018, and chair of the Council of Economic Advisers under President Bill Clinton from 1997 to 1999, but has not headed the Federal Trade Commission.

3. c. Neighbour. Bourne is the former landlord of the health secretary’s local pub. He owns a food carton company called Hinpack that switched to supplying millions of plastic tubes for coronavirus testing. Bourne admitted to contacting Hancock over WhatsApp with an offer to help respond to the demand for testing vials, but denied this played a role in his becoming a supplier. He has also insisted Hancock was not involved in Hinpack securing a government contract. The Department of Health and Social Care said there is no evidence to support claims of cronyism.

4. a. Amazon. Amazon announced full-time warehouse workers in the UK and the US are receiving £300 or $300, while part time staff would receive £150 or $150. The company is spending $500m in total. Jeff Bezos’s wealth grew by $48bn from March to June this year due to people’s reliance on online shopping throughout the coronavirus pandemic.

5. d. Nine out of ten items were available for the same price or cheaper earlier in the year before Black Friday. Retailers including Amazon and John Lewis offered deals year round, not just during seasonal shopping events.

6. b. Body cameras. Shop workers received body cameras to keep them safe as they face unprecedented levels of abuse and violence during the coronavirus pandemic.

7. c. 2025. The chancellor’s spending review portrayed a bleak image of what is to come.

8. a. Women. The new fund is going to track the performance of an index of hedge funds runby women. It was a strong year for them compared to the overall industry after many were able to limit losses during March’s market turmoil. HFR’s Woman Access Index is up 6.9% this year to the end of October, compared with a 1.1% rise in the broader HFRI 500 Fund Weighted Composite Index.

9. b. It lost 80% over one year. Analysts said the growing interest from professional investors could mean this latest peak is more sustainable than the one of December 2017, when bitcoin hit $19,458. The crash was most likely to have been due to speculative retail investors and computer-driven trading funds, says the Financial Times. This time, investors are looking at the cryptocurrency as a long-term investment.

10. d. Its debut on the S&P 500 stock index next month. Tesla is set to debut on the blue-chop index next month. Shares in the company have risen more than six-fold this year, hitting $555 on Tuesday.

Last week Sainsbury’s added its name to a “long list of firms that have cut jobs since the pandemic began”, says Ben Chapman in The Independent. The supermarket will axe about 3,500 jobs, mostly across its Argos stores, and supermarket meat, fish and deli counters, as it adapts to a “rapid shift towards online shopping”. The company has blamed the pandemic, which it argues has accelerated the decline of bricks-and-mortar shopping, with “almost 40% of Sainsbury’s sales now online, compared to 19% a year ago”.

The job losses are bad news for workers, but sadly necessary to facilitate “much-needed” price cuts, says Lex in the Financial Times. These low prices will help Sainsbury’s deal with the “fiercer” post-lockdown competition from the likes of Aldi. Closing down Argos, which faces intense competition from Amazon – as well as customer complaints that “it is often out of stock” – also frees up working capital and space. This could be used more productively to offer click-and-collect at every Sainsbury’s supermarket and build new fulfilment centres to improve availability and range.

The job cuts may make business sense, but they are “still hard to swallow”, given that we’re still in the middle of a national crisis, says Ben Marlow in The Daily Telegraph. What’s makes them particularly galling is that even Sainsbury’s admits that Argos is the “standout part of the group right now”, helping two million new customers reconnect with the chain during the last nine months. It’s no way to treat a workforce that “heroically kept turning up day-in, day-out during lockdown”, and deserves far more than Sainsbury’s offer of a one-off 10% bonus.

A sour taste

Cutting Argos and its employees adrift is bad enough, but Sainsbury’s decision to pay £231m in dividends, via a £71m interim dividend and a £160m special payout, leaves “an even sourer taste”, says Alistair Osborne in The Times. This is because the supermarket has benefited from “a taxpayer-funded business-rates holiday” that almost exactly matches the amount of money it is giving to its shareholders. While it’s true that many small investors rely on the dividends for income, much of the money will end up in Qatar, where the Qatar Investment Authority owns over a fifth of the supermarket.

Sainsbury’s isn’t the only supermarket to benefit from taxpayers’ largesse, says Nils Pratley in The Guardian. The entire sector is set to receive £1.5bn in special relief this year. The aim was to help shops that had to close during the first lockdown.

However, supermarkets not only remained open but also “enjoyed a boom” that more than compensated for any Covid-19 costs that they had to incur. Sadly, while Sainsbury’s, Tesco or Morrisons should seriously think about “returning a few quid to the Treasury”, there is “roughly zero” chance of this actually happening.

Investors often fail to appreciate just how big Big Tech is. The world’s four largest technology stocks –Alphabet, Amazon, Apple, and Microsoft – account for around 21% of the market capitalisation of America’s S&P 500 index. In other words, just 0.8% of the index’s companies comprise more than a fifth of the index.

But this isn’t the first time huge, fast-growing tech shares have dominated stockmarkets. The 1960s and early 1970s marked another Big Tech era. Markets were in thrall to the Nifty-50, 50 fast-growing large-caps that captured the headlines. Four of them were famous tech stocks: IBM, Kodak, Polaroid and Xerox. Their history, and the parallels we can draw with today’s market backdrop, hold valuable lessons for the investors and tech titans of the 2020s.

Turning down Xerox’s copier

All four tried to move onto each other’s turf, just as today’s tech companies have been doing. The star of the four was Xerox. From 1963 to 1972 Xerox’s shares rose by 1,463%. Shares in Haloid (which became Xerox in 1961) gained 120,000% between 1936 and 2000. Xerox’s first office copier – the 914 – was launched in 1961. But in the late 1950s, Xerox approached IBM to help fund and sell its copier after its launch. IBM employed management consultants AD Little to assess the prototype copier’s potential.

AD Little said the copier was too big for an office and too heavy for IBM’s typewriter-salesmen to transport, so IBM opted not to assist and Xerox marketed it alone. Xerox cleverly placed the machines with customers for free, charged a monthly rent covering the first 2,000 copies, and printed money by billing five cents a copy after that. I joined Xerox as a senior manager in 1973 and saw at first hand the events I describe below.

Copying Polaroid’s camera

Imaging and office automation were the main competitive battlegrounds. Kodak and Polaroid competed in imaging. Kodak was the global market leader in photographic film, paper and related chemicals. Polaroid, which invented polarisers (optical filters that let only certain lightwaves in) for sunglasses and 3D-imaging, made large instant-photography cameras.

The launch of Polaroid’s “pocket-sized” SX-70 colour instant-camera changed everything. Edwin Land, founder of Polaroid, was the Steve Jobs of his day. He wanted a pocket-sized SX-70 so, at its 1972 market launch, he produced it from his jacket – specially made with larger-than-standard side pockets. The SX-70 single-reflex instant camera automatically produced a fully-developed colour print in one minute and was an instant success.

Kodak’s team of 1,400 instant photography developers were stunned by the SX-70’s size and performance. They ditched their now obsolete prototype and copied Polaroid’s approach. Polaroid sued for patent infringement in 1976 and won. It was awarded $925m in damages and Kodak was obliged to cease production of all instant cameras and films.

Kodak’s next mistakes

While Kodak was struggling to compete with Polaroid in instant photography it made an even bigger mistake. A Kodak research and development (R&D) engineer, Steve Sasson, invented the first portable digital camera in Kodak’s laboratories in 1975. But Kodak decided not to develop and market it because it feared it would cannibalise its massive revenues from film photography. But digital photography did emerge and drove both Kodak and Polaroid into bankruptcy – in 2012 and 2001 respectively.

IBM, Kodak and Xerox competed in office automation. IBM dominated mainframe computers (large ones used for bulk data processing) and had a typewriter division. Xerox was the market leader in office copiers. Both companies wanted to offer a complete range of office automation so IBM introduced an office copier in 1970. Xerox sued IBM for patent infringement, won the case but was awarded only $25m.

In the 1970s both introduced word processors. Xerox’s Palo Alto Research Centre (PARC) developed the world’s first personal computer in 1972 (the Alto) complete with mouse, user-friendly interface and networking. In 1975 Kodak launched its Ektaprint copier aimed at Xerox’s profitable mid-range market segment. The Ektaprint’s speed and copy quality were superior to Xerox’s existing machines. Xerox had no inkling of the pending launch despite both firms having R&D laboratories in Rochester, New York with their staff mingling socially. I remember examining an Ektaprint in Xerox’s competitive products laboratory soon after launch and being impressed by its many major innovations and copy quality.

How did these companies fare moving onto each other’s turf? Firstly, Kodak moved tentatively, only launching its Ektaprint copier in six US cities. This gave Xerox time to launch a competing product with similar performance. Kodak then took seven years to launch the Mark II Ektaprint but Xerox launched an upgrade of its new model the year before. Xerox failed with its personal computer, the Alto, which was never marketed.

Xerox misses a huge trick

However, the Apple Macintosh and Sun Workstation were both modelled on the Alto. So why did Xerox not commercialise it? Firstly, because it was distracted and deterred by the purchase of Scientific Data Systems, a minicomputer company, in 1969; that division was closed down in 1975 with the loss of over $1bn. Secondly, Xerox’s top managers were from Ford and used to making modest improvements to existing products rather than launching new, innovative ones.

Xerox also failed to develop a timely small copier, partly because of thinner profit margins on smaller machines and because the small new-technology copier we developed within Xerox was burdened with large-copier specifications that delayed development and increased costs. That enabled Japanese companies such as Canon and Ricoh to launch small copiers and move upmarket with larger machines.

Then Xerox decided to explore inkjet technology for small copiers and printers and asked me to head up an inkjet R&D laboratory; I declined since I did not want to move my young family to the US. In 1968 the FTC (US Federal Trade Commission) charged Xerox with monopolistic practices (it had 90% of the US copier market). A consent decree was signed with the FTC in 1975 under which Xerox granted competitors patent licences at nominal royalties.

What investors and today’s titans can learn

What lessons can be drawn for today’s tech companies? First, if you develop a potentially world-beating product, do commercialise it (remember what happened to Xerox’s PC and Kodak’s digital photography). If you market it, do so wholeheartedly or the incumbent will match it before you gain substantial market share (Kodak’s Ektaprint). Do be aware of new or improved technologies that can take sales from your existing products (instant photography, Ektaprint improvements). If you try to copy a competitor’s product, do so without infringing its patents (Kodak/Polaroid, IBM/Xerox). And beware of regulators.

Internet and data are the battlegrounds for today’s tech companies. It all began when Apple introduced the Alto/Macintosh PC in January 1984 at a time when Microsoft had MS-DOS. Because Apple wouldn’t license its Mac software to others, Microsoft was able to develop Windows (launched in November 1985), which became the de-facto standard. IBM had used Microsoft to develop the operating system for its PC (launched August 1981), but failed to specify exclusivity, so Microsoft could sell its operating system to other computer makers.

In October 2001 Apple launched the iPod – a 21st-century version of the ubiquitous Sony Walkman. Sales boomed and 42% of Apple’s revenue in the first quarter of 2008 came from the iPod. Smartphones were the next battleground. In 2007 Nokia led the market in mobile phones. But although Nokia’s hardware was excellent, its software was not. That gave Apple the opportunity to introduce the iPhone in June 2007 and take market share. But Apple, as with the Mac, kept its mobile operating system to itself, giving Google the opportunity to introduce Android. Google was market leader in search and online advertising and wanted Search, YouTube, Maps and Gmail on mobiles. Enter Android in 2007 with the first Android smartphone (HTC’s) launched in 2008. Android has become a de-facto standard like Windows. It now has 86% of the market.

Microsoft badly missed the mobile opportunity. Samsung, using Android, became the number-one smartphone company in 2012 and has remained number one. In an echo of the Polaroid/Kodak case, Samsung was sued by Apple for patent infringement in 2011 with Samsung counter-suing. Apple eventually won damages of $539m in 2018. The next area of competition was data and the cloud. Amazon gained first-mover advantage by offering companies cloud storage and remains market leader. Microsoft’s recent renaissance stems from its adoption of cloud storage where it holds the number-two position.

Video streaming is another arena of competition. This was pioneered by Netflix, but Amazon (using Prime), YouTube (Google), Disney, Apple and others are all now competing with Netflix. Finally, remembering the FTC/Xerox case, tech companies need to be aware of regulatory issues. Microsoft was fined €561m by the EU for monopolistic practices in 2013 after it deleted a browser choice pop-up for Windows 7, having agreed in 2012 to include it. Alphabet (Google’s parent company), Amazon and Apple have all fallen foul of EU antitrust investigations in recent years. And the US Congress is expected to impose new regulations on Big Tech, which it sees as effective monopolies. Many analysts now expect these companies to be broken up – heralding an era of smaller

In early January 2010, the S&P 500 was sitting at 1,100. Memories of the financial crisis and fear that another was around the corner were foremost in investors’ minds.

Here we are, ten years later, and the S&P has almost tripled. Amazon shares traded hands for $110 apiece. Today they are $1,900. Facebook was not even listed.

I didn’t have 4G; the house I lived in didn’t have smart meters, or Alexa, or Netflix. The word ‘Brexit’ didn’t even exist, and Gordon Brown was prime minister. A lot has changed.

“Most people overestimate what they can do in one year and underestimate what they can do in ten years,” runs the famous saying, usually attributed to Bill Gates.

In other words a great deal can happen in a decade. So I thought today I’d make twenty predictions for the 2020s.

Twenty predictions for the 2020s

Many of these predictions will turn out to be hocus pocus, I’m sure. But I hope you’ll find them thought-provoking nonetheless.

1. On the S&P 500: the bonanza of 2010s came off a very low base. Today’s price of 3,300 is rather more elevated than the 2010 starting point, so the probability of the index doing a near-triple over the next decade is lower. Over the previous decade the S&P 500 actually lost 30%. The 2020s turn out to be a good, but not amazing decade. The S&P exceeds 6,666 – ten times higher than the infamous 666 crash low of 2009.

2. Not once in the decade does the UK see a Labour government.

3. The pound enjoys a bull market in the early part of the decade, and goes above $1.50, but, due largely to excess government spending and mismanagement, crisis then hits the currency, so that by 2024-2025 it is re-testing its 2016 crash lows (thus proving Frisby’s Flux correct once again, conveniently enough).

4. Individual, portable jet-pack flying devices are a thing.

5. Over the course of the 2000s, gold more-or-less quadrupled. It has not begun the 2020s off 20-year lows as it did back then, but it has a good decade nonetheless and breaks the $5,000 an ounce barrier.

6. Does bitcoin disappear? Or does it go above $100,000? I think you know the answer to that one.

7. Currently fossil fuels – oil, coal and natural gas – are the ultimate source of over 80% of the world’s energy, according to BP. For all the advances in clean tech, I don’t see that proportion changing over the course of the decade. We are still deeply dependent on hydrocarbons so that by 2029 the proportion of the world’s energy that derives from them is roughly the same as it is now.

8. Man goes back to the Moon.

9. The nature of employment changes even more. Jobs for life are already history (unless you work for the government). The traditional, easy-to-tax relationship between employer and employee is so last century. By 2029, 50% of UK labour is supplied by freelance, contingent or gig workers.

10. Oil is actually cheaper today than it was a decade ago. In the 2020s, however, it goes above $250 a barrel.

11. AI and robots do not decimate the workforce. Instead, as a result of the increased productivity, they facilitate and living standards improve.

12. China launches a part-gold-backed, yuan-based “stablecoin”.

13. The FTSE 250 hits 50,000.

14. Cannabis is legalised in the UK.

15. Europe (including the UK, though to a lesser extent than the continent) is locked into in-fighting between left and right – those who would have more government and those who would have less. More and more separatist movements appear as a result.

16. Unashamedly ambitious and uninhibited, Asia has fewer such issues and it strides forward, beating Europe hands down as far as economic growth is considered.

17. The use of international currencies increases dramatically. Not just bitcoin and the like, but some kind of official international coin, based perhaps on the International Monetary Fund’s SDRs, is launched. Asia launches its own SDR-type money.

18. Privacy becomes one of the dominant narratives in technology. Governments try to demand large corporations’ privacy standards improve and impose greater regulations, while, at the same time, hypocritically clamping down on new privacy technologies such as VPNs and bitcoin mixers.

19. Whether very rich or very poor, at home or abroad, we will be leading longer, healthier lives.

20. We will also be enjoying better living standards than we have ever known.

Funnily enough, of all those predictions 19 and 20 are the ones I am most sure of. They are also the best news.

Stay positive!

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is available at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere. If you want a signed copy, you can order one here.

The calls for the big tech companies such as Amazon, Facebook, Google and Apple to be split apart grow ever louder and more ferocious. It's an issue that has found rare cross-party consensus in the US, and the EU has already imposed massive fines for market dominance on the tech firms, and there is plenty of discussion about forcing them to split off whole units. It remains to be seen what happens.

Yet there is one move the critics haven't thought of, and that shareholders have yet to take into account. The likes of Jeff Bezos at Amazon and Sergey Brin and Larry Page at Google could learn a lesson from the greatest monopoly tycoon of all time John D Rockefeller and break themselves up.

A lesson from Standard Oil

The company fought the break-up, and so did its founder. But it didn't work out too badly in the end. As the owner of about 25% of the equity in each new unit, Rockefeller's fortune just grew and grew after the split, and the companies spun out of Standard continued to dominate the oil industry. Indeed, they still do today.

The tech giants could follow suit. Take Amazon. It could fairly easily split into three units: Amazon retail, shipping books and everything else around the world; Amazon media, which would include its TV unit, the Kindle store, and music streaming; and Amazon web services, which would own its massive cloud-computing business. It might lose a few synergies on its Prime service, but it could easily cover that with some form of sharing arrangement. Indeed, arguably the three baby Amazons would be in better shape after a split, simply because they would be smaller and more focused.

The same is true of Alphabet, or Google. It could be split into search, covering its main website; mobile systems, which would own the Android operating system and all the apps that come with it; and web services, which would control the Play Store, and potentially all the other internet devices the company has been investing in. The chances are that each unit would keep on growing, and the two founders would have a controlling interest in all of them.

The same logic could be applied to Apple and Facebook. Apple could split into its hardware unit, making computers and phones, and a web-services unit covering TV, games and music streaming. Likewise, Facebook could split out WhatsApp from the main social-media site, and it could possibly split itself geographically as well, just as Standard Oil did a century ago.

Bezos, Page and Brin are, without doubt, the smartest businessmen in the world. Their one final stroke of genius would be to orchestrate their own break-up. It would protect their empires from the threat of an imposed break-up, and allow them to control the process rather than leaving it at the mercy of regulators and politicians. And it would make them even richer and more powerful even if that is probably not quite what their critics have in mind.

Takeaway group Just Eat faces tough competition and slowing growth.

It's safe to say that my suggestion to short online food delivery firm Just Eat last September didn't work out particularly well. After I made the tip, it rose in price from 660p to 735p. Eventually I decided that, as it was making a loss after six months, enough was enough and that the best thing to do was to cover your position and close the trade at a loss of £228. In retrospect, I'd have been better off saying nothing, as the price subsequently crashed by nearly 20%, to below the original level of my "short" tip, at 620p. So why am I suggesting that you short it again now?

Just Eat has been hit by two key negative pieces of news. In the last few weeks, online behemoth Amazon announced it was making a major investment in Just Eat's rival, Deliveroo. While Just Eat acts purely as a portal linking consumers with restaurants, Deliveroo actually delivers the food itself, and is even starting to dip its toes into operating its own kitchens. While each approach has advantages and disadvantages, Deliveroo could use Amazon's money, logistical expertise and delivery network (especially the Amazon Prime service) to develop its model to the point where the group has an overwhelming advantage, especially among those who want their food delivered extra rapidly.

It's not just Amazon

But the tie-up between Amazon and Deliveroo isn't the only threat to Just Eat. When the minicab-booking app, Uber, listed on the stockmarket at the start of this month, it placed a lot of emphasis on Uber Eats, its online delivery service. With Uber under pressure to keep growing at all costs (which will only be increased by its disappointing performance after listing), it's possible that it could try to take market share from Just Eat by cutting the cost of Uber Eats. Indeed, there are already rumours that it is about to offer unlimited deliveries for a flat monthly price of £8 a month.

So the competition is growing increasingly aggressive. Which is why it's particularly concerning that growth at Just Eat also appears to finally be slowing. The company's latest quarterly earnings show that growth in the number of orders has fallen to just 7.4% year-on-year, a far cry from the double (or even triple) digit growth that it has been enjoying up until now. While the management team blamed the weather and also argued that the purchase of Hungry House distorted last year's figures, it suggests that Just Eat may be starting to reach saturation point.

Yet despite the recent fall in its share price, the company is still valued at 38 times 2020 earnings. That seems optimistic, given that it is facing both slowing growth and tougher competition. As a result, I would suggest shorting it again at the current price of 620p. Previously I suggested you go short at £3 per 1p this time I think you can be more aggressive, and increase this to £6 per 1p. Set a stop loss to cover your position if the price reaches 775p, which gives you a total downside risk of £930.

Trading techniques: the index effect

A lot of money is now invested in passive "index" funds that track a particular stock market index, such as the FTSE 100 or S&P 500 (see page 13). Despite their many advantages, one flaw is that if a stock is removed from the index they are tracking, the fund must sell it, and replace it with any stocks being added to the index. Some active funds also prevent their managers from investing in stocks outside a given index. While the index providers typically announce these changes in advance to avoid a mad rush of buying and selling, fund managers still have a very limited period in which to make the changes.

The boost that inclusion in an index provides to the price of a stock (or the negative impact of being booted from an index) is known as the "index effect". Several studies have confirmed that it not only exists but can produce significant returns. For example, a 2016 study by Cameron Scari of the University of Pennsylvania found that between 1990 and 2015, shares added to the S&P 500 returned an average of 5.64% more than the overall market between the announcement of their inclusion and when it formally took effect.

Given that this effect has been known for some time, it's no surprise that most of the excess return occurs on the day of the announcement. Still, even if you had waited until the day after the announcement before buying, you would still have made a pretty decent excess return of 1.8%. However, it's a bad idea to hold on for too long, as some evidence suggests that the market overreacts to the impact of the announcement. Indeed, Scari found that in the first 30 days after the changes took effect, newly added stocks typically lagged the market.

How my tips have fared

The last fortnight has been mixed for my seven "long" tips. Five of them have risen, with John Laing Group advancing to 387p (382p); JD Sports rising to 618p (from 611p); Hays increasing to 150p (from 146p); and Somero rising to 367p (from 365p). Superdry also rose to 480p (from 455p), while Safestore stayed steady at 643p.

However, the small gains on most of my long positions have been outweighed by the slide in housebuilder Bellway's share price, from 2,998p to 2,792p. This wiped out my profits on the trade, and cut the overall profit on my longs to £1,064.

On the short side, recently-listed Zoom's share price hasn't fallen enough yet to make it worth shorting. Pinterest did fall beneath the $25 a share level at which I suggested going short, but it has since rebounded to $25.50, so you would currently be making a loss of £100. Online estate agent Rightmove has also risen, from 549p to 559p.

The good news is that Weis Supermarkets has fallen from $40.22 to $38.46. Meanwhile, Tesla's operational and financial problems mean its share price has dropped from $231 to $190. This means that my open short tips are making a collective profit of £484.

The overall profits from the remaining short and long tips come to a total of £1,548, which is still more than the losses of £854 that I've made on the closed positions. While I won't close any positions this week, I'm going to suggest tightening some of the stop losses on my positions.

So you should increase the stop loss on John Laing Group to 350p, and raise the JD Sports stop loss to 500p. At the same time, given how far Rightmove has risen, I'm going to recommend that you cover the position if the share price goes above 580p.

Cinema chains have had a rough decade. Audiences have stagnated as people watch fewer films on the large screen and concentrate on television instead. There is constant pressure from studios either to shorten or scrap the 90-day window between a film's cinema release and its launch on streaming services (known as premium video on demand). Some streaming services, such as Amazon and Netflix, are even trying to get studios to skip a cinema release entirely and go straight to TV instead.

Nevertheless, the sector is hardly a write-off. While there has been a modest per-capita decline in the number of people attending cinemas, it is relatively limited, amounting to less than 1% a year per person in the United States. And thanks to more expensive tickets, overall revenue is still growing.

What's more, over the past year studios have backed away from accelerating film launches on premium video on demand after studies suggested this cannibalises rather than enhances revenue. Talk has shifted from eliminating the 90-day window to reducing it to 50 days, a recognition that a film's success on the big screen drives secondary sales.

A resilient operator

One cinema chain that has defied the tough backdrop is Cineworld. Its strategy has been to invest in the latest technology, such as the bigger IMAX screens and wall-to-wall Superscreens, on the basis that if you're asking people to pay extra, you should give them something that isn't available at home.

It has also had a lot of success selling monthly memberships that permit unlimited visits, while the Picturehouse chain of cinemas focusing on arthouse and independent productions has diversified its range of films. Cineworld has delivered strong growth, more than doubling revenue between 2013 and 2017 while maintaining strong margins.

Its UK success bodes well for the recent $3.6bn takeover of Regal cinemas, one of the largest chains in the United States. Over the past five years Regal's market share has declined to around 20% (allowing plenty of room for expansion), and experts view its cinemas as outdated. Cinewold has pledged to turn Regal's fortunes around by investing in a refurbishment programme. It will also attempt to increase non-ticket revenue by boosting the amount of food and drink on offer (this currently accounts for a third of sales).

Despite the group's strong revenue growth and explosive share-price performance it trades at only 12.3 times forward earnings. Its 10% return on invested capital shows that it is squeezing value from the money that it puts into the business. Overall, we'd suggest buying Cineworld at its current price of 289p. We'd suggest that you buy it at £12 per 1p, compared with IG's minimum of £1. We'd put the stop loss at 209p, which will give you maximum downside of £960.

How my tips have fared

The slight recovery in the value of the FTSE 350 over the last fortnight has bolstered our long positions,with four out of the six stocks rising.

Greene King went up from 492p to 499p, Redrow rose to 558p from 500p, Shire is now at £45.57, up from £44.86. Next is at £51.96, compared with £50.51.

However, Premier Oil edged down from 109p to 107p, increasing our losses to £437.50, while Saga tumbled to 116p, down from 130p. Overall, Greene King and Shire are making money, while the rest of our long positions are in the red.

The bad news, however, is that while market conditions have boosted our longs, they have generally been bad for our shorts. With the exception of Netflix, which fell from $330 to $315, all the others went up in value.

In some cases, the rises were relatively minor, with bitcoin going up to $6,404 from $6,387, Snap increasing from $6.84 to $6.90, and Weis Markets also rising, from $44 to $44.60.

However, Tesla shot up from $261 to $341 after it shocked everybody by actually making a profit, thanks to income from carbon credits. Just Eat also jumped from 601p to 626p, while Twitter is now at $34.02.

Overall, while the losses on our longs have been reduced to £1,338, the profits on our shorts have shrunk to £1,392. This means our open positions are now just £54 in the black.

At present we have three open positions held for more than six months: Greene King, bitcoin and Tesla.

While we'd generally look to close any old positions that are making a loss, I'm going to give my Tesla short a reprieve although if things don't improve by the end of the year I'm definitely pulling the trigger. I'm also going to reduce the stop loss of bitcoin to $7,500.

Trading techniques: Dr Copper

Traders are always on the lookout for leading indicators that can provide advance warning of a recession and a downturn in the stockmarket. One of the most popular has always been the price of copper or "Dr Copper" as it's sometimes known. Because copper is needed for everything from batteries to the wiring inside houses and cars, if firms expect the economy to expand they will start to buy more copper in anticipation of increases in output. This will push prices higher. During an economic slowdown the process will go into reverse.

There is some evidence that copper consumption and global economic growth are linked.For example, Tom Wise of the Bank of England found a strong correlation between growth in global copper consumption and worldwide economic growth between 1981 and 2016. He also found that between 1999 and 2017 there was generally a strong three-year rolling correlation between metals prices and various measures of world activity.

However, copper's usefulness as a guide to the stockmarket, notably America's, has declined. Both copper and the S&P 500 collapsed in the second half of 2008, before rallying in early 2009. However, between February 2011 and early 2016 copper prices fell by more than half, while the S&P 500 went steadily up by more than 53%. Part of the reason for this is that the biggest consumer of copper is now China, which accounted for nearly half of world consumption in 2017. The decline of American manufacturing means that US copper consumption is only two-thirds of its 1998 level.

Online food and grocery shopping has taken longer to emerge in the US than in other developed countries. This is because America's sprawling suburbs present a logistical challenge to any would-be entrant, compared with countries with more densely populated urban areas. However, Amazon is trying to change this.

Last August it bought upscale retailer Whole Foods, which it is now using as a base of operations for rolling out its online delivery service. It has already announced same-day delivery to most of the largest cities, and is quickly expanding this to smaller cities across the United States.

While this may be good news for American consumers, it is bad news for US grocery chains who will now have to deal with a competitor who can offer both a greater selection of goods and greater convenience. Indeed, even if Amazon's new project doesn't end up stealing their customers directly, it could push prices and margins downwards, reducing their profits.

While all parts of the sector will be affected to a certain degree, mid-sized regional supermarkets are particularly vulnerable because they rely on local dominance rather than economies of scale to keep competitors at bay.

A sitting duck that's worth shorting

One such chain is Weis Markets (NYSE: WMK). Weis is a chain operating 205 stores in seven Northeastern and Mid-Atlantic states (Pennsylvania, Maryland, New York, New Jersey, Virginia, West Virginia and Delaware); more than half of these stores are located in Pennsylvania where it has a 20% market share.

Its prices are generally around 10%-25% higher than competitors', while it gets low ratings from consumer surveys. This means that it is vulnerable to competition, not just from Amazon, but also from low-cost chains such as Aldi, which is also expanding its offerings in the United States. Weis has also had several run-ins with the food standards authorities in Pennsylvania.

Despite these problems, Weis trades at 21 times current earnings, much higher than the sector as a whole. Revenue has grown by an average of just under 5% a year over the past five years a solid performance, but by no means spectacular.

While the company has said that it will spend $100m in an attempt to keep the firm growing, most of the money will be put into overhauling and refurbishing existing stores, rather than opening new ones. Indeed, the company plans to close as many stores as it will open, so it's hard to see how this will translate into significantly higher sales.

Overall, we think that you should short Weis at the current price of $44. While IG Index allows you to bet as little as £0.01 per $0.01 (or £1 per $1), we would suggest that you short it at £100 per $1 (or £0.10 per $0.01). In this case you should close your position if it gets to $53.50, which would give you a maximum downside of £950.

Trading techniques... split US government

On 6 November America goes to the polls in the mid term elections, voting for the entire House of Representatives and one third of the Senate. Some traders argue that the expected Democratic capture of the House will be negative because President Donald Trump will struggle to pursue his pro-business agenda. Others are more sanguine, noting that a Democratic victory could make it harder for the president to wage trade wars.

LPL Research has found that between 1950 and 2017 the strongest S&P 500 returns (18.3% a year) came from a Democratic president and Republican control of both the House and the Senate. Interestingly, the next strongest performance came from a Republican president with each party controlling one part of Congress (the most likely scenario in 2018), with annual returns of 15.7%.

The year of the presidential election cycle that you are in may be as important as the result. One theory argues that the first two years of a presidential term tend to produce poor returns, as politicians are more likely to implement painful measures. However, as the date of the presidential election gets closer, politicians become more cautious about doing anything that could hurt their chances of getting re-elected.

Although nominally independent, the Fed could also come under pressure from the White House to stimulate the economy before the election. Research by Charles Schwab found that while S&P performance was similar in the first, second and fourth years, market returns were typically double the average in the third year.

How my tips have fared

As you'd expect, the turbulent market conditions have hit our portfolio of long positions over the last fortnight. Of the six currently open, only Shire increased, from £43.67 to £44.86, thanks to Japan's Fair Trade Commission's approval of the Takeda bid, though it still needs approval from the EU.

The five remaining positions all declined, with Premier Oil falling by nearly 20% from 132p to 109p. Redrow fell from 561p to 500p, Greene King from 492p to 480p, Next from £54.26 to £50.51 and Saga declined from 137p to 130p.

The good news is that four out of our six short positions have declined. Bitcoin is now $6,387, compared with $6,579 a fortnight ago. After briefly rising to $379 on the back of better-than- expected subscriber figures, Netflix fell to $330 (down from $350) on the realisation that content costs are increasing too, forcing the company to borrow more.

Snap has also declined to $6.84 (from $7.48), while Just Eat has declined to 601p (621p). However, Tesla has risen to $261 ($251), while Twitter has also bucked the downward trend, climbing from $28.45to $29.18.

Added together our open long positions are now making a loss of £1,573. This is still more than balanced by our shorts, which are making collective profits of £2,229. If you take into account the losses of £427 from our closed trades, then you get an overall profit of £229.

We're not going to recommend that you close any positions now. However, we are going to adjust some of the stop-losses on our short positions downward to lock in some profit. So the Bitcoin stop-losses will be cut to $7,750 (from $8,000), the Twitter stop-losses will be reduced to $40 (from $42.73), while the Snap one rises to $15 (from $17.85).

When Amazon, Berkshire Hathaway and JPMorgan Chase announced a healthcare joint venture for their US employees earlier this year to tackle soaring costs, it wiped billions from the market value of health insurers. The trio offered scant detail, says the Financial Times. Yet the mighty combo of an e-commerce giant, Buffett's investment conglomerate, and America's largest bank by asset value was seen as a huge threat to one of America's biggest industries.

Starting a healthcare revolution

The appointment of Dr Atul Gawande to lead the "ABC coalition" was in some ways a relief for healthcare's vested interests, however. Gawande is that rare thing: a surgeon-journalist. He teaches at Harvard Medical School and writes for The New Yorker. He has gained "national recognition" as a best-selling author chronicling the state of America's "broken" medical system. But he has never run a major business.

For an industry running scared about a big disruption, that seems like a stay of execution. Gawande's arrival suggests the new entity "may be focused more on experimenting with technology and data" than on "the more radical step of launching a managed-care provider that would directly compete with the biggest US healthcare players".

Industry insiders have been quick to highlight Gawande's lack of experience, says Forbes. They don't seem to understand that "Jeff Bezos, Warren Buffett and Jamie Dimon did not hire a big-thinking industry outsider to set up a conventional insurance system or haggle with doctors and hospitals over prices". Gawande was selected to "change how healthcare is structured, paid for and provided". His job is "to make traditional health plans obsolete, and to create a bold new future for American healthcare".

It would be hard to find anyone better qualified, says The Independent. Born in New York in 1965 to immigrant Indian doctors, Gawande initially "toyed with a political career", taking a degree in biology and political science at Stanford, followed by a Rhodes scholarship at Oxford, where he read politics, philosophy and economics. Returning to the US, he went to Harvard to study medicine in 1990, but then ditched the course to become head of health and social policy to Bill Clinton, later following him to the White House as a senior adviser.

From politics to medicine

To the relief of Gawande's parents, he eventually completed his medical studies and began practising: "I didn't like the idea of my future being dependent on politics". Yet it is for his writing that he is most admired. Encouraged by his friend Malcolm Gladwell, Gawande "quickly garnered acclaim and awards for his elegant essays on public health and medicine", says the FT.

Four subsequent books have expanded his reach. His third, The Checklist Manifesto, became "a manual for medical reform". Hospitals following his basic advice "found their death rates nearly halved". It was a 2009 article questioning the extraordinarily high costs of the US medical system that first attracted the attention of Warren Buffett and his business partner Charlie Munger, says Bloomberg. "Munger thought the article so socially useful that he mailed Gawande a $20,000 cheque."

"A tall, gangly figure", Gawande is "softly spoken, modest, contained", says The Independent. He has a ferocious work ethic, getting his writing done in the 45 minutes between surgical cases. There will be little time for that now he is writing a blueprint for mass reform, says Forbes. "The good news for healthcare's incumbents is that the change process will likely take five to ten years The bad news is that the clock just started ticking."

Since January 2015 the market capitalisation of Amazon has risen by $630bn a quite staggering increase of 550%. The company is now worth around $770bn. The natural conclusion is to assume that this impressive leap in value is all down to Amazon taking over the retail universe, and laying waste to the world's high streets and shopping centres as it does so.

And yet, you'd be wrong. Amazon may have disrupted or destroyed the business models of everyone from booksellers to supermarkets by selling goods online, but the main factor behind its more recent gains accounting for more than 50% of the rise in its market capitalisation is the soaring value of its "cloud" business, Amazon Web Services (AWS), which is now valued at around $400bn, up from just $40bn in early 2015. In short, Amazon's spectacular recent gains don't come from selling items out of warehouses stuffed with physical goods, but from being paid to store data in warehouses stuffed with banks of servers.

Amazon is far from being the only big-name beneficiary of the booming cloud business. Microsoft perhaps best known as a PC software behemoth has seen its own market cap rise by $445bn since early 2015. At least 80% of this gain is down to its own cloud business, Azure, and other cloud-related product areas. Other companies reaping vast value gains from the cloud include software services group Salesforce.com, search-engine giant Google and computing giant IBM. Which leads us neatly to what may be your most pressing question right now what exactly is the "cloud"?

What is the cloud?

The cloud is simply a way to store data remotely, in a bank of servers located perhaps in the same office building or somewhere else entirely, rather than in the hard drive of your computer. As long as you have access to the internet, you can then draw that data down or play with it, in the cloud, whenever you choose. In the early days of the cloud, most big companies built and owned their own data centres, stocked full of computer servers on which the data was stored. They would also own and run "redundancy" data centres, to act as back-up in case the first ones failed to work. This is known as "private cloud" provision ie, you create your own cloud.

The problem with private cloud provision was that it meant all of these big companies had to manage their own data centres. This generally was not their core competence you don't necessarily want to be spending a lot of time sourcing and managing increasingly complex IT equipment if you're running an investment bank, for example. Thus, when the opportunity came to outsource data-centre management, it was assumed that most companies of any size would jump at the chance to shift from their private clouds to the "public cloud".

In reality, the initial phase of growth took longer than anticipated. Companies worried about the security implications of moving to the public cloud having someone else looking after their sensitive data seemed a step too far. They were also concerned about the quality of their internet connections how could they access the data if web access went down? not to mention the cost of closing the data centres they had already built themselves. Yet security fears have been allayed over time by a lack of breaches at the large public-cloud operators. Internet speeds have been fast enough for all forms of cloud usage for a number of years now (unless you are a retail customer in rural England!). And as for the final point, companies have mostly decided to keep their legacy data centres, while electing to fill any of their new data storage needs by moving onto the public cloud. As a result, legacy or "on-prem" (short for "on-the-premises") data centres have only seen a very slow decline, while the growth of public-cloud usage has been slower than was first anticipated ten years ago.

Born in the cloud

However, the most cloud-intensive businesses of the modern age were all created so recently that they don't have any legacy data centres to be weaned away from. Indeed, these internet businesses have built their business models around the outsourced public cloud Amazon itself being a prime example. All of Amazon's e-commerce sites were stored on AWS by 2009. AWS was included within Amazon Retail until 2012, and Amazon Retail was its largest customer. Nowadays AWS's largest customers include film- and television-streaming giant Netflix, rent-a-room specialist Airbnb and music-streaming group Spotify. One of Microsoft's largest customers is taxi service Uber.

Cloud IT spending

These companies are all really only capable of existing because of the public cloud. Most of them started small and without the capacity to build huge data centres off their own bat, and as it turned out, they didn't need to. It's these "cloud native" businesses, rather than traditional firms, that have been the main drivers of public cloud growth in recent years. Overall, about a third (roughly $1.6trn) of global IT spending of around $4.8trn is related to the cloud, and spending on private cloud provision still dominates overall industry spending. So far this has been stable, although as the chart above shows, it is expected to fall in the future, which means that investors remain very focused on public cloud provision in its myriad forms.

Swimming through alphabet soup

As you may have noticed, the cloud is an area awash with acronyms. There appears to be nothing that IT engineers enjoy more than making up confusing acronyms for every aspect of their business lives, and then using them as much as possible to prevent any outsider from deciphering anything useful about their industry. In IT speak, the cloud is broken up into three main areas. Infrastructure-as-a-Service (IaaS) relates to the provision of remote data centres about $40bn is set to be spent on IaaS this year. Platform-as-a-Service (PaaS) is similar, but instead the cloud is hosting applications that can be used by developers or end users spending here is expected to reach $15bn this year. Finally, there's the largest area Software-as-a-Service (SaaS). This refers to the hosting of all services on the cloud, such as Microsoft Office 365 (which offers widely used word processing, spreadsheet and presentation software), or Salesforce.com's customer relationship management software.

As data centres and other equipment used for private clouds run by individual companies become obsolete, they are likely to be gradually replaced by public cloud services. Public cloud services are almost natural oligopolies. There are two main reasons for that. Firstly, the economies of scale are extremely powerful. Secondly, the ability to catch up with a leading player is nigh-on impossible for a late entrant (unless they focus in small niche areas what's known as the "edge of the cloud" in IT speak). This is good news for the main companies in the sector because there is still plenty of room for growth.

Goldman Sachs estimates that IaaS and PaaS have barely scratched their potential market to be specific, they reckon that only 7% of that market has been penetrated so far. Penetration is increasing very slowly at a rate of 1%-2% growth per year but due to the relatively small number of leading players in the sector, this means dramatic growth rates for the companies best placed to take advantage. The SaaS space, meanwhile, represents a larger, more competitive, market, with many more players jostling for attention. But the oligopolistic players in the IaaS and PaaS space still have major advantages here, in terms of their ability to bundle SaaS products to benefit their customers. AWS doesn't just offer storage to its customers it also currently offers 103 different cloud-related services, and this number is rising on a monthly basis. Most analysts see no reason why over time cloud services can't account for 50%-70% of the market overall, which suggests that the main players will enjoy strong growth in this market for the next ten to 20 years.

The cloud-market leaders

The three biggest players in the sector are AWS, Microsoft, and GCP (Google). Last year AWS had a 42% share of the public cloud business, Microsoft came second at 14%, and Google lagged behind at 5%. This year alone the three plan to spend about $30bn between them on developing their businesses. Microsoft is seeing the fastest growth an incredible 100% a year, while AWS grew at a 46% annual rate in the last quarter. At this rate, Microsoft will have a 22% share of the market by 2019 while AWS's will have fallen to 35%. Microsoft's secret weapon is the corporate relationships it has built up during 30 years of providing Windows software to customers around the world. AWS, by contrast, only came into existence in 2006, and moreover, because Amazon is so active in other industries such as online grocery and food delivery AWS is effectively barred from an entire range of businesses who don't want to "get into bed" with the perceived enemy. As for the third major player, Goldman Sachs reckons that Google can build its market share up to 10% by next year, helped by its superior machine learning and artificial intelligence capabilities.

Use of the public cloud has accelerated in the past year hence the strong share-price performance of the leading names in the sector. This acceleration is usually a sign that a technology is moving into the mass market, and it's true that public cloud companies are increasingly making inroads into new companies by selling them services that they can use on their own private clouds. These include ways to analyse and use data to make an underlying business more effective. Google and Amazon have multibillion dollar research and development budgets for advanced technologies such as artificial intelligence and machine learning, which means that their product offerings generally dwarf anything a customer can create in-house.

Should you invest in these companies?

In short, this is a rapidly growing sector with plenty of room to get even bigger. And the biggest players have a near unassailable position. As a result, AWS, Microsoft Azure and Google Core are all great growth businesses. But they have seen huge share-price gains too. So is the good news in the price?

AWS is usually valued on an enterprise value (EV) to earnings before interest, tax, depreciation and amortisation (Ebitda) basis. This takes account of the company's high levels of capital expenditure necessary investment for future growth. Traditionally, a valuation of 15 times EV/Ebitda would be seen as high the Macau casinos traded up to that level in their boom of 2008-2014, for example. AWS currently trades on a multiple of 25 much higher than that. However, the business does have 60% Ebitda margins and sales growth of 46% a year and climbing. With market penetration at just 7% right now, there is also a decade or two of growth to come. So if growth rates can be maintained along with Ebitda margins (which, in fact, should actually rise as economies of scale improve further with size), the multiple would collapse to just seven times within four years. Given that many analysts expect growth to accelerate for the next 12-24 months before it starts to slow, that still looks a good valuation to me.

Microsoft trades on a price/earnings (p/e) multiple of 26 times for this year, which is a little less punchy than AWS's valuation. However, the whole Microsoft business is growing more slowly than AWS and Amazon, as the cloud business only makes up 15% of Microsoft's total group revenue. It will grow to be 35% of total group revenue in two to three years' time, and will allow Microsoft as a whole to see 15% annual earnings growth for the next two to three years. Given that, 26 times might seem high but as with AWS, this is growth that looks set to be predictable for many years.

However, the one thing we know in equity markets is that something will upturn the apple cart the difficulty is predicting when. Some analysts stress that SaaS is a more efficient service than IaaS/PaaS and that this will let rivals such as Salesforce.com steal growth from the public cloud triumvirate. Others stress that "edge of the cloud" technologies will get larger as clients' needs become more complex, making it harder for the big players to cater to the whole market.

Others see the risk of new entrants. Facebook has the server scale to get involved if it chooses and in China the triumvirate is excluded the market there is dominated by the traditional Chinese duo of Alibaba and Tencent. They can match the triumvirate for resources and thus capital spending budgets so when will they start to sell cloud services overseas? Lastly, as we have seen with Google in the search-engine business, and Google and Facebook in online media, competition authorities start to get interested when dominant players begin to make too much money and abuse their positions.

The public cloud space has all the makings of that story, with the added feature that the triumvirate (and its nearest rivals) are all US or Chinese businesses. Thus, European regulators and competition authorities are likely to be the first to query the power of AWS, Microsoft and Google in this sector. Yet many of these risks seem mid- to long-term, and so it's likely that for the next 12-24 months Amazon, Microsoft and Google will continue to provide investors with strong returns based on their hold over the public cloud. If you haven't bought in yet, there are still plenty of gains ahead.

What do you do?

Wondrwall is a Manchester-based technology company that converts standard homes into "intelligent" ones. It does this by monitoring the living patterns of the occupants which rooms they use and how the home performs and then using machine learning and predictive modelling to control heating, lighting, security and safety. It also integrates voice-command technology from Amazon so users can access "smart assistant" Alexa and override settings at any time.

What has been your greatest achievement?

Eight of the top 15 house builders in the UK are rolling out Wondrwall in their homes. Getting to this point has taken a great deal of effort, but it has been worth it.

What has been your biggest challenge?

Getting hold of the right people to talk to. When we talk to the house builders, they almost always say, "Wow, that's brilliant, we want some of this". But they get lots of calls from lots of people selling all kinds of stuff, so managing to get through to them to get to that point can take a lot of persistence, and sometimes a little luck. It gets easier though as you get better known.

What are your plans for hitting your targets this year?

This year will be about supporting our roll-out partners. We want them to have lots of happy customers that are excited with the intelligent features of their homes, so we will be working with them to help them sell and market Wondrwall to their customers, and help them differentiate their homes from those of other house builders. After lots of discussions, this will also be the year that we focus on expanding into other European markets.

What's the one piece of advice you'd give to your fellow entrepreneurs?

Stay positive and believe in what you are doing this will carry you through the bumps that you will experience along the way.

It's been nearly four years since Royal Mail was privatised. Whatever the merits of the decision politically, it's been a poor investment, unless you were among the many small investors who "flipped" your shares early in the process. If you'd invested at the peak in early 2014, when the share price stood at more than 600p, you would have ended up losing nearly 40% of your money. The price has fallen to 376p, below the price at which it first listed. It recently suffered the shame of being demoted from the FTSE 100, which may force several funds to sell their holdings in it.

There are plenty of reasons for investors to be concerned. A dispute over changes to the pension scheme mean there is a strong chance that the company will face industrial action, which would hit revenues and reliability. In the longer term, it faces competition from Amazon, which has shifted from being a major customer to a competitor, investing large sums of money in its own distribution network. And in the longer run, drone delivery and 3D printing could make the whole idea of human beings delivering parcels an anachronism.

However, the fact remains that the company is making substantial strides in dealing with these changes. It has worked hard to cut delivery deals with retailers, including signing agreements with Marks & Spencer, and John Lewis. These contracts have enabled it to benefit from the rise in parcel volumes as retail sales continues to shift away from bricks and mortar towards online commerce. Royal Mail's GLS subsidiary also helps it to benefit from growth in e-commerce in continental Europe. There are also signs that its recent investment in information technology is helping it to streamline costs, making it more competitive with its rivals.

Even if Royal Mail proves unable to turn the core business around, it is sitting on a lot of valuable real estate, much of it in London. It has already sold some of its surplus property to reduce its debt, but it is still trading at a discount of around 10% to the value of its tangible assets. And if you include intangible assets, this widens to 25%. It also looks cheap compared to earnings it trades on a price/earnings ratio of around 9.6. Its ability to generate lots of cash means that even if the worst comes to the worst, it should be able to keep paying the generous dividend of 5.8%.

At these levels, the bad news seems priced in. So I'd suggest going long on Royal Mail at 377p. IG Index requires a minimum stake of £1 per 1p. I'd suggest increasing this to £2.50 per 1p, and putting on a stop-loss at 177p, limiting your total downside to £500.

Spread betting the forex markets

When it comes to spread betting, surveys suggest that foreign exchange (forex) accounts for around a third of total volume, on a par with stock indices. While virtually all spread-betting firms offer currency trading, there are a few things to watch when picking a firm for forex trades.

As with any spread betting firm, make sure they have UK regulatory approval. Regulated firms have to follow certain practices designed to protect the interests of their clients, such as holding enough capital to ensure they can cover any losses. Spread betting with a regulated firm also grants access to the Financial Services Compensation Scheme in the event that a broker goes bust (this only covers the balance of money in your account, of course, not losses you incur).

Because forex involves using high levels of leverage to make profits from relatively small price movements, low bid/ask spreads are vital. These are usually measured in terms of "pips", and usually to four decimal places (so one pip in GBP/USD is equal to 1/100th of a cent). The good news is that spreads are low for most big brokers. CMC Markets, IG Index and City Index all have spreads of 1 pip or lower for GBP/USD and EUR/USD.

We're not big fans of ultra-short-term strategies. The markets can move so quickly that the price at which you place an order may not be the price you end up getting, and stop-losses can be triggered at below their specified levels. However, as a guideline IG Index states that virtually all foreign-exchange trades are executed without slippage, and that only about 8% of trades with stops are affected for an average of 0.4 pips.

Portfolio report

It's been a little while since we checked our portfolio and we've got some good news to report. Driven in part by uncertainty over North Korea, gold prices surged to more than $1,350 an ounce a few days ago, the level at which we suggested you automatically take profits. While they have fallen back since, you would have made £882 in profit had you bought gold at the suggested level of £7 per $1 back in February (issue 832) when we first suggested the trade.

Not all of our trades have been as successful. Our decision to short Ocado is now nearly £250 in the red after the share price went up to 310p. Our punt on Virgin Money is also losing £147 thanks to a fall in price from 318p in late March, when we first recommended the trade, to 216p today. Some of our newer bets have also had a bit of difficulty, with our high-risk punts on Barclays and the AA managing to lose a combined total of £242 in the space of a fewweeks.

Still, there have also been some strong performers. The Brazilian political crisis may be ongoing, but oil giant Petrobras continues to be a star performer, thanks in part to a new partnership with oil major Shell. Overall, it is up £268 since we tipped it in June. Spread betting firm IG Group has also made £131, and construction firm John Laing Group is also doing well, up £112, having seen solid growth in the value of its net assets.

In addition to automatically closing out gold, we're going to suggest that you close out Mitchells & Butlers, which hasn't really gone anywhere. We also think that you should take losses on Virgin Money.If you've been following our recommendations about timing and position size, the closed trades should now have a cumulative profit of £1,113, while the open positions should be currently sitting on a profit of around £22.

A sense of gloom hangs over the retail sector but pick the right stocks at the right price and there are still potential pots of gold out there for long-term buyers, says Phil Oakley.

The high street is in decline. "Bricks and mortar" chains are just waiting for Amazon to wipe them out. The crashing pound is driving up costs, squeezing both customers' wallets and retailers' profit margins. You don't have to look far to find reasons to be gloomy about retail right now. Yet ask any retailer and they will tell you that selling stuff to consumers has never been easy every sale is hard won. And if you focus too closely on general economic trends, it's easy to forget that good retailers adapt to the changing world around them, while ambitious newcomers exploit those changes.

Yes, over the past decade, well-known brands such as Debenhams, Mothercare, Laura Ashley, French Connection, and even Marks & Spencer, have seen profits and share prices come under severe pressure. But there have also been some amazing successes. Online fashion retailers such as Asos and Boohoo have seen their profits and share prices rocket, making many of their earliest investors rich in the process. And it's not just the tech-savvy firms. Some traditional retailers have also prospered just look at the success of sportswear company JD Sports. Or even WH Smith the newsagent is regularly described as a high-street dinosaur, but its strategy of focusing on locations with high footfall, such as train stations and airports, while shedding unprofitable sales, has delivered total returns of more than 430% for shareholders over the decade.

So while it makes sense to take account of the big picture, the reality is that retail is no different from any other sector there are always threats and opportunities. It's all about finding the right stocks at the right price. And as you'll see, there are still potential pots of gold out there for long-term buyers.

How skint are consumers?

Britain is a nation of shoppers, with consumer spending vital to the UK economy. The good news is that people are still buying retail sales rose by 5.7% in the year to June, according to the Office for National Statistics. The bad news is that wages are growing more slowly than inflation in other words, household incomes are shrinking in real terms. Meanwhile, consumer debt is rising at its fastest rate since the last boom in 2006. It's hard to see this as a good thing, particularly for businesses such as car dealerships, where recent strong growth in new car sales has been primarily driven by credit and the use of personal contract plans (PCPs).

That said, while these concerns are undoubtedly valid, wages and credit are not the only drivers of spending. For a good few years now, consumption has received a significant boost from retiring baby-boomers, who are now spending money rather than saving it something that is often overlooked. Affluent pensioners who have accessed their pension pots and perhaps released equity by trading down to a smaller house have also boosted the "silver pound". So while a long consumer boom may not be on the cards, talk of an imminent collapse in spending may be overplayed.

The rise of internet and discount retailers

While some retailers have undoubtedly struggled, others are making hay from the disruption caused by the internet and other new shopping trends. Successful online retailers who lack the legacy costs of bricks-and-mortar stores have been able to undercut prices charged by their high-street rivals. As their sales rise, they benefit from economies of scale, which allows them to cut prices further, in a virtuous circle.

Then there's the rise of the discount retailer. The rapid growth of Aldi and Lidl has wreaked havoc on the profits and strategies of the big supermarkets, for whom the only bright spot has been the growth of convenience stores smaller town-centre branches. Tesco and Sainsbury's are trying to buy their way out of trouble. Tesco is looking to buy food wholesaler Booker, while Sainsbury's has bought Argos and is taking on Amazon. Time will tell whether this pays off. The discounters are also on the march in general retail the likes of B&M Stores, Home Bargains and The Original Factory Shop are all growing rapidly. These companies have wooed shoppers by selling goods at very cheap prices, and look well placed to continue to do well with bargain-hunting, cash-strapped shoppers.

Shopping around for bargains

The sense of gloom hanging over the retail sector means it is currently possible to tap into some of the best growth trends in the sector, while also potentially picking up some bargains. But be careful. Some apparent bargains may be value traps (that is, stocks that look cheap but are likely to stay that way). Some of the struggling chains mentioned at the start of this article Debenhams, say face a very difficult future. These shares are probably best left to more adventurous investors with a considerable appetite for risk.

Instead, I've looked for shares in the most promising retailers that right now are trading at reasonable, rather than very expensive, valuations. I've split these into three main categories: growth companies capable of exploiting some of the prevailing retail trends; undervalued shares; and finally, possible takeover targets.

B&M European Value

(LSE: BME) 370p; forward p/e 21.5; yield 1.9%

A successful business must do something that its rivals cannot. Usually this means selling a superior product or service that cannot be copied, or selling the same products or services, but at a lower price. Discount retailer B&M's selling point is the latter: it sells selected branded goods and various non-grocery products at much lower prices than the big supermarkets. So how can a relatively tiny retailer like B&M which is chaired by former Tesco chief executive Sir Terry Leahy undercut its giant competitors in this way, and still make a profit?

First and foremost, B&M is a very focused retailer. It keeps a limited stock of goods. So for example, it might sell just two brands of washing tablets rather than ten. This is repeated across its range. So it ends up only really selling around 5,500 different products, whereas some of its rivals might sell up to 30,000. As a result, the company never gets bloated with too much stock. It operates on a "one good in, one good out" basis, and rarely holds more than three months of potential sales of a product in stock. Holding too much stock eats up cash flow. B&M's policy minimises this risk. It also allows the company to focus its buying power behind particular brands, so that it can buy them more cheaply and pass the savings on to customers. If it sells a lot of a particular product, it can then go back to the supplier and negotiate a better deal.

Secondly, the company has a stake in a Far East buying and importing company that allows it to import goods from China at very good prices. It has built up good long-standing relationships with more than 300 suppliers by treating them well and paying them quickly. In return, B&M has been able to stock its stores with a wide range of non-grocery goods, such as toys and homewares, that sell at prices which the competition finds hard to match.

Thirdly, B&M adopts a flexible approach to trading in its stores. It stocks seasonal goods at relevant times of year to attract more customers. This has enabled it to deliver very healthy profit growth consistently. The group now wants to increase its number of UK stores from 543 to 950, and to expand its German business too. It has just bought convenience retailer Heron Foods in order to extend its retailing skills in this growing market. The shares are not cheap, but with like-for-like sales growing strongly, they could be worth paying up for.

JD Sports

(LSE: JD) 375p; p/e 17.1; yield 0.4%

This is another solid growth play. JD Sports has rewarded long-term investors spectacularly.But there could be yet more to come the company looks very well placed to capitalise on the growing trend for "athleisure" (wearing sports clothes and trainers for everyday use). JD has enjoyed a long period of impressive like-for-like sales growth a key measure of retail performance leading City analysts consistently to raise their profit forecasts. It's also benefited from the chaos at arch-rival Sports Direct, opening new shops in the UK to take advantage, and has quietly built a presence in Europe and Asia too.

Yet the shares have sold off recently, as the period of analyst upgrades has come to an end. A recent trading statement spooked investors profit margins had fallen slightly, in an effort to maintain high sales growth. However, forecasts were not cut, and decent growth is still expected. As a result of the sell-off, the shares now trade at a much more reasonable valuation. With good underlying growth and further benefits to come from the recent acquisition of Go Outdoors, the shares look decent value. Throw in a squeaky clean balance sheet with a large net cash balance, and there's a lot to like about this business.

Next

(LSE: NXT) 4,380p; p/e 10.8; yield 3.6%

Next is one for the value investors. The high-street stalwart has gone from being a sector darling to dog as sales and profits growth have ground to a halt. Its shares had more than halved from its late 2015 peak before rallying recently. Yet despite its growth setback, Next remains very profitable and continues to generate impressive returns on investment and prodigious amounts of free cash flow. Its financial position is very strong, even when the hidden debts from its rented stores are taken into account (by "hidden debts" I mean the fact that Next is tied into leases on these stores that it cannot break without incurring costs). It is in no danger of going bust.

Last week's trading statement revealed that sales had not deteriorated any further, which kicked off a relief rally in the shares. Sales at Next Directory the company's online business grew by a healthy 11.4% and the company's previous profit forecast was maintained. Next Directory already makes more profit than the high-street stores, which means that Next already has the basis of a very strong internet business. Unlike rivals such as Debenhams, which are locked into long-term rental deals on its stores, Next is in a position to reduce its high-street exposure as its leases mature in the next few years, or to slash its rent bill and boost profits.

The shares are not expensive, and offer a reasonable yield of 3.6%, based on a regular dividend of 158p per share. On top of that, as Next continues to generate lots of surplus cash, this is likely to find its way into shareholders' pockets. For example, it looks set to pay four 45p special dividends this year, which would bump the yield up to a chunky 7.7%. If Next can maintain its levels of cash flow then this looks like a decent tangible return, especially if the dividends are reinvested. Next does carry some risks. Directory profits contain a large amount of interest payments on credit balances, which could be under threat if the economy slumps. Its high profit margins may also be a sign that its prices are too high, leaving it vulnerable to competition.

McColl's Retail

(LSE: MCLS) 268p; p/e 15.5; yield 3.8%

Finally, keep an eye on potential takeover targets. McColl's owns 1,292 convenience stores and358 newsagent outlets. Its shares have performed well recently as investors have begun to see the potential of its growing size in an expanding market. Its competitive position has also been strengthened by a new wholesale food-supply agreement with Morrisons.

Underlying sales growth is nothing to write home about right now, but profits should grow due to the recent purchase of nearly 300 stores from the Co-op. Analysts also point out that McColl's is a potential takeover target for a big supermarket looking to grow its convenience business. Morrisons may have first refusal, given its food-supply deal, but it could draw the attention of Sainsbury's if the latter's attempt to buy Nisa falls through.

A consolidation drive in car sales

Another area of the retail market that may see some takeover activity is the car dealership sector. Consolidation has been quite common in recent years. The sector is understandably out of favour just now, given the credit-driven nature of new-car sales. But profits can be supported by used-car sales which tend to be more profitable and more lucrative servicing and repair work. The valuations of some companies are low, as shown in the table below, and this may also attract some takeover interest.

(Disclosure: Phil Oakley owns shares in B&M European Value Retail and JD Sports)