Author: Adam Vranka | 5 min. reading
Exactly 55 years ago, a small group of scientists from the University of California managed to send the first message over the ARPANET computer network. The first message sent was to the Stanford Research Institute, and its content was "LO". The message was supposed to contain the word "LOGIN" but the system crashed as soon as the two letters were sent. Back then it was not the Internet as we know it today, but it created a foundation on which to build.
Over the next 55 years, the Internet has undergone an interesting evolution and dealt with various obstacles. In 1969, no one expected that the ARPA Institute network, which was set up by the US Department of Defense, would change the lives of almost everyone on the planet. According to the Statista platform, approximately 67% of the world's population uses the Internet.
Many companies have used the Internet to their advantage, and for many it is still the basis of their business today. And it is the combined market capitalisation of the 3 largest Internet companies - Alphabet (Google's parent company), Amazon and Meta Platforms - that recently surpassed the USD 5 trillion milestone.
Source: Google Finance
In the figure we can see capital expenditures (CAPEX) of the four Big tech companies for each quarter. Recently, these 4 companies reported their financial results for the third quarter of 2024 and together their cost of capital for that quarter was around $60 billion. A large portion of these costs are mainly going towards AI infrastructure investments. Analysts at US City Bank expect the four companies' capital expenditure for the full year to reach $209 billion, up 42% year-on-year.
Conclusion
It is questionable whether artificial intelligence is so disruptive and beneficial that these companies are investing tens of billions of dollars in it each quarter. Only the future will tell. But to return to the introduction, nobody expected the first computer network to change the way the world works either. Smartphones are owned by nearly 70% of the planet's population , according to Statista. Without the internet, their use would certainly be much smaller.
Expectations for AI are currently high, and this is reflected in the valuations of the stocks of these large companies. But valuations are already high for many investors, and sometimes all it takes is a small hesitation or disappointing financial results for a stock to fall more than 5% in a day. Either way, the reality is that at least one of these companies forms the basis of many investors' portfolios or mutual funds, and also the basis of most of the world's digital life. Shares of these companies can also be found in a number of our mutual funds offered in the Slovakia, such as the equity funds Fond maximalizovaných výnosov, ERSTE STOCK TECHNO, Fond budúcnosti or the mixed fund Active Portfolio.
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