Big Tech is building a $80B capex wall around its empire
Big Tech companies -- like all the apex predators of all the world's concentrated industries -- is swimming in cash; but unlike those other firms, Big Tech is not using the cash merely for financial engineering; it's doing actual engineering, sinking $80B this year into capital expenditures that will form a wall around the industry's incumbents, which new firms will have to scale in order to challenge them.
The new equipment includes robotic manufacturing plants, huge data-centers, undersea data-cables, and other infrastructure that might have been provided by a patchwork of service firms in an earlier era.
The focus on infrastructure spending is a mixed bag: owning tech infrastructure is always a gamble, betting that it won't go obsolete before the owners have finished amortizing its purchase; if there are major breakthroughs in any of these technologies, new companies can avail themselves of them without having to take a painful write-down on last-generation tools.
And of course, infrastructure spending does not contribute to inequality the way stock buybacks do.
But Google parent Alphabet Inc. and the other four dominant U.S. technology companies-Apple, Amazon".com, Microsoft, and Facebook-are fast becoming industrial giants. They spent a combined $80 billion in the last year on big-ticket physical assets, including manufacturing equipment and specialized tools for assembling iPhones and the powerful computers and undersea internet cables Facebook needs to fire up Instagram videos in a flash. Thanks to this surge in spending-up from $40 billion in 2015-they've joined the ranks of automakers, telephone companies, and oil drillers as the country's biggest spenders on capital goods, items including factories, heavy equipment, and real estate that are considered long-term investments. Their combined outlay is about 10 times what GM spends annually on its plants, vehicle-assembly robots, and other materials.
Tech Giants Spend $80 Billion to Make Sure No One Else Can Compete [Shira Ovide/Bloomberg]
(via /.)