Tech giants are directing billions into product development as demand surges. But is the pandemic-related spike just a temporary gain on the way to an inevitable cyclical downturn?
In this video from "The Virtual Opportunities Show," recorded on Jan. 4, Fool contributors Asit Sharma, Demitri Kalogeropoulos, and Jose Najarro discuss the prospects for tech innovation continuing to soar in 2022 and beyond.
Asit Sharma: I am just curious if this isn't something that we've seen play out over a number of great industries in that there's much more room to go. There is more growth than a person would expect, the trends are stronger than the average investor realizes, and we should listen to people who've been shouting from the rooftops. I know my friend John Rotonti has been talking about these stocks, gosh, for the last couple of years and he is very bullish on this sector.
Just curious from either view, and then we'll move to Jose's stock. In terms of the near-term demand for the chip industry and extensions of that as you've been talking about systems on a chip, do you see this as something that is just a byproduct of all the capital that's floating and how the world got stretched down its resources during COVID? Or do you think if COVID hadn't happened, we would still, at some point, have seen some event where the demand just became this overpowering, obvious thing like it has. Because of COVID-19 now everyone can see what those few foresighted people saw a couple of years ago.
Demitri Kalogeropoulos: I would say that the situation is analogous to what we saw in e-commerce over the pandemic where basically e-commerce was growing as a share of total revenues, eating up a bigger percentage of regular retailing revenue at a steady pace every year. Call it a few percentage points a year and then in one year it gained 15% during the pandemic. It's not like this year it dropped back down. It's going to keep growing.
I think we basically accelerated 10 years of e-commerce growth into one year, and we're just starting from that point on. That growth just happened. Then it's just a bigger industry and I think that's what's happening here, too. I obviously not an engineer or anything, but that's what it feels like. It feels like we've just accelerated and had multiple years of growth in eight or 12 months or 18 months. Then we get the growth from that bigger position, which is great news for all these tech companies, great news for a lot of investment places there, because it's a lot easier to get a profitable business out of that bigger retailing position.
Sharma: Jose, any comments before you come forward with your company?
Jose Najarro: I feel like I hate saying the phrase or hearing the phrase, it's different this time, because most of the time it's never different. But unfortunately, I have not seen those other times to understand how those times were for me to be able to compare the two. To some extent, I do believe it might be somewhat different. Obviously, companies withholding on CapEx expenses last year accelerated or increased the demand this year. But at the same time last year, I feel like companies learned a lot more about their consumers than they have ever learnt, that's when they really paid attention, hey, our consumers can't come toward stores. Hey, our consumers don't want to do this or that.
We need to evolve our technology right now to grab the retention there, to grab them to come to our products. I think this innovation of technology accelerated so quickly in the past and the adoption of the consumers accelerated so quickly. That's really the tailwind driving the future demand. It's companies being a little bit more aggressive where we were able to grab these many customers last year because we had this growth in our technology acceleration. Now let's focus on accelerating our technology a little bit faster.
The point I'm going is, I feel like back then, the companies were a little bit more fearful to some extent of innovating their technology, because they didn't know how consumers would take it. I feel now they realize that consumers are not as hesitant as they thought with new products. They are driving that for us right now to innovate their new technology. To some extent, yes, I do believe especially in the short term shift demand might fluctuate, there might be a bit of an over order at one point and then it might slow down, but I think the overall trend is still going to remain high and it's not going to go back to any low levels we've seen in the past.
