00:00 Brad Smith
Over the past few years, Big Tech and AI have been seen as darlings in the field. The stock has grown by more than 1,000% over the past 5 years. But our next guest said the story of large-scale technology dominance is nothing new. Here we have Ahmed Banafa, a professor at San Jose State University’s School of Engineering. Ahmed, I’m glad you’re with us. When you look at its history and compared to today, we will take a closer look at the history of concentrated market leadership.
00:47 Ahmed Banafa
Very good, Brad. OK, this is what I’ve seen this movie before. This is what happened. We were talking about the Nifty 50 in the 1970s, and then we moved all the way to the tech giants in the late 1990s. Then we’ve seen something about teeth, fang, you know in the 2010s, now we’re talking about seven. Therefore, concentration is not new. This is the problem they present. Now, about the cycle itself and what we see in these seven fantastic sevens is basically what they offer. I mean, in a few words, I mean, they dominate in certain areas that are touching every level of the economy, namely AI, cloud computing, semiconductors, and consumer platforms. That’s why it really matters.
02:21 Brad Smith
So with that in mind, I’m glad you’ve grown up because we’ve seen so many different iterations. It’s hard to track. We see it also from Fang to Batman. I mean, there are a lot of different iterations of these iterations, but for this conversation, it’s really interesting, is this the size of these companies different from what we talked about when the nifty 50s that day?
03:13 Ahmed Banafa
This is a good question. There are three things to differentiate between seven and seven, except Tesla because they have been through tough times now, but it is still a solid company. The first is that they make money. They have a lot of profits. You’ve seen, you know, $42 or $43 billion in revenue and the same thing with Amazon, $143 billion and $70 billion from Microsoft. Today, we will receive a letter from Apple. That’s the first. They are making profits. Second, they have cash. They have a reserve, and it’s cash, you know, have money. Third, they are global. They are not restricted in the United States or in certain geographical areas. So that’s what makes it this, seven are different from before.
04:56 Brad Smith
So now about 30% of the S&P 500 are just those seven stocks. How risk is the average investor?
05:14 Ahmed Banafa
In this case, this is indeed a high risk. The reason for this is that you only need two to trip. And you know, they have a bad income, or they have a bad expression, and now we will have 30% of that S&P 500 index. The key here is that investors are considering a very important point here, namely AI. I mean, AI is not just a product that a company wants to sell or serve. This is what they do inside the company. For example, Brad, you know, was Microsoft’s CEO yesterday, and he said up to 30% of Microsoft’s code on Microsoft is done by AI. The same goes for letters or Google. Specifically, about 25% of the code is written by AI, which means they don’t need many people, which will reduce costs within the company and increase sales of services outside the company. This is the difference.
07:00 Brad Smith
So what makes these seven companies so difficult to get out of their position from the top of the chain that really drives market enthusiasm?
07:37 Ahmed Banafa
Well, the products they offer and their position in the market and the market share they have. You are talking about companies like Amazon. I check their market share and the services they provide. Looking at Nvidia itself, I mean, it is the king of semiconductors, especially AI chips. Whenever we think we’re going to end, they come up with a new chip, and you can run this chip with the meta. Meta attempts to expand by owning AI services or providing other services they provide to consumers. They know the game is really tough and everyone is watching them because of those seven, who will be next and then we will take their place. But they understand this. You know, they spent billions of dollars in research and development, billions of dollars to make sure they understand the market and they will be the market first with AI-related products in the market because we see that it is actually the future of the market.
09:04 Brad Smith
Thank you very much for spending your time here, Ahmed. A truly insightful discussion. Thanks for it.
09:12 Ahmed Banafa
Thanks.
