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Comment by ArtTimeInvestor | Hacker News Reader

I find it increasingly hard to form an investment thesis around big tech companies like Microsoft, Apple and Alphabet.

Mostly because the CEOs all seem so similar. Every time I listen to investor calls of one of them, they are all like "We are proud that we have built tons of great stuff and are excited to build more amazing great stuff.".

I do not see any big bets or different approaches that differentiate the companies.

Can you guys tell me why you would rather invest in one of the big tech companies than the other?

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The three companies you have listed have radically different businesses. They just happen to all be in what we call "tech".

Alphabet revenue are 98% based on ads. How do you see the future of ads in the current landscape? If you are bullish then invest away. If not, then does Alphabet has a viable alternative they are investing in for the long term?

Microsoft revenue is a mix of a ton of different things, the biggest of which are cloud, productivity (Office and such), and direct consumer products (Xbox, Windows etc). They are basically selling shovels in the tech-age gold rush. They have just so many different billion dollar revenue streams that they could lose any one of their 3 big businesses and still be ok. But by far their biggest growth driver is Azure for now, how do you feel about that versus the competition?

Apple is all about consumer hardware, as long as they continue delivering best in class product they will be making tons of cash. They are also looking to enter the electric car industry one way or the other, which is potentially a gold mine, do you think they can succeed?

I am not very bullish about the future of ads but I don't see Google being limited to ads. Search is not valuable enough for users at the moment to pay for it. But with the advent of AI, your "AI companion" will become so valuable that users will probably pay hundreds of dollars per month for it.

Apart from that, they build phones, run datacenters, develop self driving cars, business software ...

As for Azure, I think Googles cloud business is in the same order of magnitude. I don't see one of them having a long term competitive advantage here.

As for Apple, I think consumer demand in tech will grow just like business demand in tech will grow. And I don't see anyone disrupting Apple either. They will just continue to iterate and grow.

IF some new development appears on the horizon, then it will be interesting how the 3 CEOs will position themselfes. But at the moment, I don't see anything that will disrupt any of these companies.

The parent mentioned not what alphabet does, but where it gets (most) of its revenue from. Google is making phones, but not really making a lot of money from them. So the question is, what is the future of alphabet?

> Apart from that, they build phones, run datacenters, develop self driving cars, business software ...

But none of those have significant impact on their revenues. If ads business tanks for a reason or another (new legislation around privacy, or remake of 2020 Covid-related ad bust), then they tank as well. Cloud revenue is probably one of their biggest non-ad revenue stream, but it's less than ~5% of total revenue.

And Waymo, DeepMind etc, are all moonshots, they currently make 0$, but that's also where the disruption potential could come from. So if you believe in them, that could be a good reason to invest.

> As for Azure, I think Googles cloud business is in the same order of magnitude.

Azure is ~4x bigger than GCP.

> If ads business tanks

Sure. If disruption appears on the horizon in one of the sectors these tech companies are in, then it will get interesting how the CEOs position themselves.

But at the moment I don't see that in any of the sectors. So I don't have an hypothesis to rank Goole/Apple/Microsoft. All three hum away in a similar fashion at the moment.

I'm not sure what you are getting at.

My point is that they are very different companies, with different ways of making money and different risk profiles. But all with massive growth currently.

So to your question about which one to invest into, then you would make that decision based on which vertical you prefer (ads? service? consumer hardware?) or which one is more risk tolerant.

Or since they don't overlap that much (when just looking at tech), you could invest in all threes. Unlike say, FB and GOOG, which are both suffering from the same risks (but are making different bets for the long term).

I did not ask "which one to invest into" as in getting a suggestion.

I asked about which one you would invest into and your reasoning behind it.

> But with the advent of AI, your "AI companion" will become so valuable that users will probably pay hundreds of dollars per month for it.

If that's true—of which, respectfully, I am highly skeptical—that doesn't mean they'll be making vast amounts of money.

Most people—like, at least 70% of Americans—can in no way, shape, or form afford hundreds of dollars per month on something like that.

Maybe they can. Most americans go to school, right? What if an AI companion makes that obsolete? University too. Those are very expensive years that can be saved. Maybe you cannot get a high paying job anymore without a $500/month AI companion because without it you are considered stupid.

How about doctors? How much visits to a doctor can be made obsolete with an AI companion?

How about entertainment. Americans spend something like $200 per month on entertainment. Maybe your AI companion can entertain you better.

> Maybe you cannot get a high paying job anymore without a $500/month AI companion because without it you are considered stupid.

This is very much saying "maybe if you're not already rich, you shouldn't be allowed to get a good job."

Is it currently different? A college degree in the US costs tens of thousands of dollars.

And years of your time. With an AI companion, you might have to pay $500/month but maybe you can start working right away. Skipping all those "learning" years.

A college degree also signals something: that you stuck with something for years, and finished it, and that your college believes you learned something along the way.

With an AI companion, all you signal is that you have several hundred a month to spend on an AI companion.

It's possible for someone born into poverty to get scholarships and college loans to get a higher education. (Sometimes it's not the best deal in the world, but that's not the point here.) It's a large expenditure, but it's a one-time expenditure; once you have the education, no matter how poor you are for the rest of your life, you still have it.

No one's going to give you a loan to get a $500/month "AI companion" for the rest of your life—in part, precisely because it's for the rest of your life.

What you are proposing can not be seen as anything other than a way to ensure that society is permanently stratified by socioeconomic class.

These companies are all making a ridiculous number of big bets.

Apple Silicon, TV production, self driving cars, household robots, smart assistants, AR/VR, healthcare.

Every startup out there is meanwhile building a generic enterprise SaaS app with a React front end.

Pretty much. They help make the glue for the big boys. I miss 2006 when it seemed like any startup could become something big. It's seems impossible now.

How is Apple Silicon a big bet? The company is so big, what could go wrong with them making their own chips? Would it really tank the company if one day it turns out it is better to buy chips from external companies again?

Since I own APPL stock, yes.

ARM is the future of laptops, and the M1 is amazing. You can't buy, at any price, an ARM laptop that compares to it anywhere else but from Apple and I don't see anybody else able to do it - MS has tried and failed because they don't own the stack well enough that they can get x86 to work.

So I invested in APPL. I haven't invested in Microsoft, because I don't know enough about what they are doing, and won't invest in metabook due to ethics.

But tech is not just laptops :)

Even if Apple has a competitive advantage regarding laptops, I don't see that making Apple a better investmen than Google or Microsoft as they have their areas too where they are best.

Because Apple has 10% of the market, but a better product. Google arguably has the best product, but they also have 99% of the market. Nowhere else to grow.

Sure, if your thesis is that all the worlds corporate server computing is migrating away from company owned and operated data centers and into cloud computing providers over the next decade, then you would invest in Amazon (AWS) or Microsoft (Azure).

If you made that investment decision 5 years ago you would have tripled your money already.

That is indeed one of my thesis. But how does it not apply to Google? They run datacenters too.

Atlassian! Don’t miss Atlassian.

It went up from $120 to $180 during Covid. Wait, $230, no, 320, today $483!

Disclosure: I own shares. I’ve paid them less than $30. I knew Atlassian was excellently managed, but I didn’t imagine it would climb this high. I’m surprised it always goes silent next to GAFAM.

Of the three, I find Apple the easiest to understand - they actually build physical stuff and that's the core of their business. Apple could operate in a vacuum and still be profitable. Their business model is neat and simple.

Isn't Microsoft also very easy to understand? We need datacenters. Microsoft runs them. We need all kinds of business software. Microsofts offers it. We want to play games. Micosoft offers that too.

And Google ... we need someone to organize all that publicly available data on earth, right? Well, Google does that.

> And Google ... we need someone to organize all that publicly available data on earth, right? Well, Google does that.

You know their money doesn't come from organizing the publicly available data, but from organizing all behavior data you generate as you browse all that publicly available data ;-)

It is a bit more dark than that, sadly. Of the big cloud providers, Azure is the least well regarded by users (significantly so), but MS have the longest pedigree of twisting the arms of corporate procurement people. Similarly, Apples ability to make cool stuff is dwarfed by their ability to coerce people into paying huge sums for minor hardware upgrades.

If your software licenses translate into cloud credits, then it's a no-brainer. Clever engineers like us will make it work with stone knives and bear skins if that's what they provide us.

I would say a Google Cloud is least regarded as a cloud provider.

I often see mention of his people would never use GC for to keep it trust. E.g is that service or product going to remain available or be deprecated. From what I understand GC had a fairly bad reputation for this.

GCP is a bit weird; you are correct that they had a reputation for cancellation of products and services but I'm not sure how well deserved that was for the cloud platform itself. People who start using GCP seem very happy with it, but for old-school enterprise customers MS is seen as the safer bet.

I can tell you I have workloads I'll eventually need to port from AppEngine's Python 2.7 runtime (which is the last version of the original Python runtime with which the service debuted). It's still there and still working flawlessly.

They have different business models:

* Apple builds nice hardware

* Amazon is like a giant online store, they also do some cloud compute hosting on the side (an outgrowth of being a giant online store) and sell some hardware and ads.

* Facebook is...before being Meta, a social media network.

* Google sells ads, they tried the social media thing and it didn't work out. They do some cloud compute hosting, but not as much as Amazon or Microsoft.

* Microsoft does enterprise and consumer software/services.

There is "overlap" but the core business of all these companies is very different (and when they compete, there is usually someone who is much more dominate than the other).

You described the differences of these companies. But not how that would lead you to invest in one and not in another.

The way I see it, they all build out a different part of the technological landscape. And they all do it in a similar fashion. Since I expect the whole landscape to continue growing, I don't see one being a better investment then the other.

> Since I expect the whole landscape to continue growing, I don't see one being a better investment then the other.

If you are just looking to make money, you would look for value: not the company that will do the best in the future, but the company whose performance in the future is undervalued by other investors (so is not already reflected in its stock price). Most of us don't really have enough extra information (beyond what the market already "knows", and avoiding going to jail for using inside information) to do that very effectively, so you could buy some kind of index fund (perhaps specialized in tech or even bigcorp tech).

Or you could invest in the company whose vision of the future you are most excited about, or something idealistic like that. But that wouldn't really give you influence in the company, nor would it necessarily provide the company with extra capital (since you are most likely just buying from other investors...well, bidding up the stock will still indirectly benefit them).

They are making more and more of their money from services.

No, they are all the same and you'll do best by splitting your investment equally among the ones you're considering.

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