Not only emerging markets have outperformed the S&P 500 this year. Technology has shown great relative strength: The Nasdaq held its November lows during the March selloff and has gained 22 percent since the beginning of the year.
Looking forward, I believe the Nasdaq will continue to outperform the overall market thanks to information technology companies. We are in the verge of unleashing a new technological revolution in the Internet, the Web of linked data, which opens door for new competitors, expanded business opportunities and, possibly, a new Internet bubble.
The Web of linked data are standards that eliminate friction for more efficient value exchange on a massive scale. This mechanism allows to intelligently link and relate information from all over the internet. Data is coded in a “universal language” that machines can understand. This destroys the barriers that multiple types of databases or programs create.
Bottom line is, this new technology will allow the Internet to comprehend personal characteristics or needs and deliver information to users in the context they seek.
One of the bigger business implications of the “new Internet” relates to E-Commerce. Thanks to the Web of linked data, transactions will occur in a more efficient manner as demand will be matched with supply almost instantaneously. Intermediaries who control, organize, or advertise business won’t be as necessary thanks to this breakthrough.
Google's second quarter earnings were $5.52 billion, and this is mostly from their stake in the advertising business, which means specific advertising for e-commerce.
Middlemen are necessary when the medium of value exchange produces some sort of friction.
Yahoo! and Google know this very well and have made a successful business out of it. They became the bridge to cross the distance between producers and consumers (of both information and products) and they charge you for that.
Friction is precisely one of the things that the linked data seeks to eliminate, therefore, it follows that linked data is a major threat to their core business.
Do they know this? Hard to say, however they are indeed starting to incorporate bits of this new technology to create richer results when looking for consumer products. They seem to have one foot in but keep in mind that, due to their size, they can only move so fast and will hardly risk cannibalizing their core business at this stage.
This might be a “blue ocean moment” where big tech companies will prefer to wait and buy their way in. This creates huge potential for startups and acquisitions.
The current setting looks auspicious; there is market for growth, there is a tech revolution under way, there is liquidity in the market, and threats to the core business model of key players. The last tech bubble left a nasty imprint and I expect that this time around things would be more controlled. I wouldn't even call it a bubble, perhaps just the start of a huge opportunity.
Needless to say, I will be keeping an eye on the tech industry, specifically, on tech companies that show concrete initiatives to harness the power of the next web, the Web of linked data.
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