Cambridge is overrated
What is your outlook for the technology sector after several developments have recently taken some of the shine from the largest and most well-known technology companies?
Irfan Furniturewala: There's no doubt that technology stocks are valued highly, especially when compared to other names. But many of the big technology or technology-related stocks like Facebook, Amazon and Netflix still have above-average growth potential. Their high ratings seem entirely justified. Now that regulatory pressure is mounting and a serious trade conflict with China looms, investors are wondering whether valuations are not implying excessive growth. As a result, market volatility is increasing, with technology stocks at the forefront. After the failed merger attempt by the two chip manufacturers Broadcom and Qualcomm, there is increasing doubt that cross-border mergers can succeed. There are also more and more doubts about the economies of scale of technology platforms that dominate the market.
Most recently, Facebook came under pressure because of the inadmissible disclosure of personal data. Do you think big data companies like Facebook and Google will now face new regulations?
Furniturewala: Yes. I think this is a likely result. Until the incident with Facebook and Cambridge Analytica, concerns about stricter regulation of big data companies were not very specific. But now an outside company had access to the private information of around 50 million Facebook users. The topic is more topical than ever, and maybe big data companies around the world are now being scrutinized. They have always had a hard time in China, but now they may find limits elsewhere as well. It can be argued that Facebook apologized a little too late. But now people are admitting the mistake and praising improvement - in the guidelines as well as in their implementation. I think this is correct. The transfer of consumer data is a very sensitive issue. But I believe Facebook will find a way to solve the problem. Otherwise the American Congress will do it.
New rules for the collection and exchange of customer data might not hurt either. Ultimately, however, I don't think that the profitability of Facebook and Google will suffer much from these developments. It may even be possible to regain the trust of some customers who are rightly angry about the unauthorized use of their personal data.
Despite these challenges, big data companies have an important function - be it in Internet research or in social media. In fact, they are modern utilities. Take Facebook: The company is so successful because it provides an increasingly valuable service. It ensures that people are connected to friends and family in real time, via the largest social network in the world. Then there is the advertising. When you scroll through Facebook on your smartphone, it is simply part of it. The same goes for other providers like Instagram and WhatsApp. I therefore believe that these companies still have a great future ahead of them, with very good growth prospects.
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