The technology industry is hitting some serious turbulence after a decade and a half of intense growth during which the top companies in the sector have amassed staggering wealth and power.
In just the past few weeks, several developments have rattled the generally optimistic tech space. Some big lay-offs are in the news, with big cuts pending at Intel, a company so synonymous with the sector that it’s been termed an industry “bellwether” for decades.
Also, in the eyes of some prominent industry analysts and Wall Street investors, artificial intelligence (AI) is suddenly not looking as unstoppable and game-changing, and AI start-ups are struggling with funding. And, this week, Google was designated a monopolist in violation of US antitrust law, a momentous and likely, far-reaching decision that could reshape the future industry landscape.
The Information Technology and Innovation Foundation, a non-partisan US think tank, says that a third of US economic growth is driven by the tech sector
Warnings about tech bubbles and imminent popping have long been as commonplace as iPhone software updates. But following a hard downturn in the last recession, the sector took off like the clappers and has been running at speed ever since.
In just the five years between 2010 and 2015, tech sector jobs grew by 20.5 per cent. The US Bureau of Labor Statistics has predicted a 3 per cent growth in all jobs from 2022-32, but 14 per cent growth for tech jobs. The Information Technology and Innovation Foundation, a non-partisan US think tank, says that a third of US economic growth is driven by the tech sector.
So if the sector is beginning to judder, repercussions are likely to spread far and wide.
All of the developments noted above share connecting threads that offer insight into what is happening, and why this may be a big inflection point (a term from Intel’s famed leader Andy Grove) at which the tech industry reconfigures.
Take Intel. Once the titan of the $600 billion (€549 billion) chip sector, it has been struggling. Intel’s had production problems and has failed to keep pace with rivals, or new directions in chip technologies, particularly in providing chips to power AI. Nvidia now towers in that space. As it tries to remake itself and costs mount, Intel has announced it will shed 15 per cent of its workforce, with an as yet unknown impact on its 4,900 employees in Ireland.
Share prices for Google, Microsoft and Amazon have slumped due to growing doubts that the astonishing sums these companies have invested in AI will pay off anytime soon, if ever
But wait. Some analysts now think Nvidia, newly one of the world’s most valuable tech companies, is monstrously overvalued precisely because it is so tied to the growth of AI, which is beginning to look dramatically overhyped, even by tech standards. Share prices for Google, Microsoft and Amazon have slumped due to growing doubts that the astonishing sums these companies have invested in AI will pay off anytime soon, if ever.
One view is that AI will have an important, but relatively dull place doing mundane heavy-duty processing tasks that increase productivity, rather than in the dramatic areas of current investment.
What if AI is not worth it, a glitzy technology that gulps down company budgets with little return, like Meta’s ill-judged metaverse pivot? Who do we believe? The deeply invested tech giants, big investors and a super-hyped cluster of AI start-ups have much at stake financially in keeping the AI ball rolling.
And just as investor confidence wavers and AI appears to be losing some of its sparkle, Big Tech now has something else to fret over: the active threat of antitrust law. This week, a US federal judge determined that Google had worked assiduously to maintain an illegal monopoly in online search — for example by paying third parties like Apple to make Google’s search engine the default offering on devices and browsers.
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Google will appeal, but the landmark decision will have considerable sway even if overturned. And there’s more to come in an active US antitrust case pipeline (aside altogether from separate investigations in the EU). Apple, Amazon and Meta are all being sued by the US government, and Google faces a second federal suit over its online advertising business. The companies deny the charges.
Defending an antitrust suit imposes a heavy burden: years, mounting costs and operational uncertainties, plus the risk of serious outcomes, including company dismemberment.
There’s good evidence that the last big US antitrust case, taken 20 years ago against Microsoft, changed how big tech companies operated, opening up competitive space for new internet-era companies like, ironically, Google.
In a final irony, Microsoft itself is back under US federal (and EU) antitrust scrutiny yet again. Guess what for? Partnerships with AI companies such as OpenAI and Anthropic
That’s even though the judge back then decided against the possible remedy of breaking up Microsoft. Just the threat likely altered how Microsoft and other companies chose to act. So this week’s decision is likely to have a significant long-term effect that will reshape the tech landscape in ways we cannot foresee, opening up new competitive spaces – perhaps for companies that may become tomorrow’s monopolists)
In a final irony, Microsoft itself is back under US federal (and EU) antitrust scrutiny yet again. Guess what for? Partnerships with AI companies such as OpenAI and Anthropic. An investigation by the US Federal Trade Commission is scrutinising similar AI partnerships involving Google parent Alphabet, and Amazon.
Tech’s current woes are not isolated incidents. The interconnectedness signals more fundamental industry problems, a myopic sector that’s fallen for its megahype and become too dependent on manipulative partnerships, lazy semi-competition and customer lock-in rather than the quality it most professes to idolise: innovation.
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