The Secret's Out: Apple, Facebook, Google, Amazon, Microsoft Warring for $500 Billion Market
Written by Ophir Gottlieb and Jason Hitchings
A lot of the information we're about to cover might feel like a surprise. In many ways it is. That's because our purpose is to provide institutional research to all investors and break the information monopoly held by the top .1%.
AN EPIC SHIFT
It's coming. A colossal shift. A fundamental change. It will impact almost everything: the speed with which business models and efficiencies are transforming are accelerating at unprecedented levels. Science will be revolutionized, business structures will be transformed.
We all knew it was coming. We've heard the catch-phrase for years. It was hovering just out of sight for so long that we almost forgot it was there. It is one of the fundamental shifts coming in the very near future that will change how our smartphones, cars, businesses and the entirety of the Internet will function.
We're moving out of the Ice Age, the Iron Age, the Industrial Age, the Information Age, to the age of the Cloud.Apple (AAPL), Facebook (FB), Google (GOOGL), Netflix (NFLX), Amazon (AMZN), Microsoft (MSFT) and Salesforce (CRM) see the coming change too - all seven companies are racing to control its future. What's more, we've found the surprising company one tenth their size that may win out over all of them.
You can mine for gold hoping to be one of the lucky few to win the gold rush lottery, or you can sell pickaxes and shovels to the gold miners and guarantee you've won the lottery several times over.
There will be more data created and stored this year alone than has been stored and created in all of human history up to this point. The results will be disruption and innovation on a scale that can only be compared to the most revolutionary technologies of the modern era: the car, the plane, the phone, the computer, the internet.
And the stakes are huge.
The market for Cloud Computing will be absolutely explosive. Projections see the market growing from $80 billion last year, to half a trillion within a decade, according to a study by Wikibon:
The biggest and most successful technology companies in the world are pouring resources into this field. To understand the trend, we must understand the players.
And once we know the players, we can find who is best positioned to rocket higher with this trend.
Apple is sitting atop the technology throne, making an almost unfathomable sum from its domination of the devices space. CML Pro will graph the Net Income of the world's largest companies to show us just how dominant Apple's cash machine is:
At $54 billion per year in after tax profits, Apple makes more than three times as much as Google, in second place.
Apple is leveraging those cash flows and injecting massive sums into a spectrum of technologies. Not only are they investing billions, but the rate at which Apple is investing is accelerating. CML Pro will show us just how big their technological bet has become:
$2.4 billion dollars per quarter. Annualized, Apple will be investing more into R&D than the entire economic output of 60 different countries.
Apple sees the changing technological landscape as well as any company, and they've responded in decisive fashion. As of 2014, Apple's iCloud had 500 million accounts. On January 26th, 2016, we learned that Apple has one billion active device as its install base. We will measure Apple's iCloud service in billions of users as of now.
This trend gives Apple the golden opportunity to reinforce the iPhone's dominant position while simultaneously opening up massive new revenue streams.
But there's a different company we think will benefit even more from this trend. Remember, we're looking for the shovel, not the gold minor.
AMAZON AND NETFLIX
Amazon's cloud product, called Amazon Web Services (AWS), is the dominant player in the field. It drives fully 50% of operating profit while making up just 8% of revenue. It's famously known for hosting Netflix's (NFLX) video streaming, which at peak hours accounts for 30% of the entire United States bandwidth. Said differently, Amazon's cloud with Netflix's content makes up a third of the entire Internet at peak hours.
Here is the chart of revenue growth for Amazon Web Services (AWS):
But, if we slice that down to what Goldman Sachs calls cloud "platform" market share, we get this:
While AWS nears 40%, the second largest player, Microsoft (MSFT) sits at 8%. No other firm is above 5%. If Amazon simply tracks segment growth, its AWS business will grow to $30 billion by 2020.
But, we want the company that powers every cloud rather than to choose the company that will ultimately have the largest cloud business.
It's now time recognize that Salesforce (CRM) has turned into a massive power in the cloud computing realm. Here is the company's all-time revenue chart:
If we take data from 2014, we can see that Salesforce's pure play software as a service (SaaS) and cloud computing company is winning, and by rather staggering amounts. Check out this market share image.
CRM is crushing it, more than doubling Oracle's share and tripling Microsoft.
But Salesforce's SaaS combined cloud product is not the ultimate winner.
FACEBOOK'S CLOUD SERVES 2 BILLION PEOPLE
As early as 2012, Facebook announced it was entering the cloud storage realm. In fact, it was this move that allowed Facebook's Instagram to grow into the colossus that it is today, with over 400 million monthly active users (MAUs).
Back in 2006, Facebook faced an existential threat because it was growing so quickly -- just its 10 million users almost brought the company down:
"its mere 10 million users faced serious problems as its servers were overwhelmed by user requirements."
Here's a chart of Facebook's users which goes back to 2008. Remember, 10 million almost brought the company down, today we are looking at nearly 2 billion.
The success wasn't an accident -- Zuckerberg and Facebook were early to grasp the potential and need of Cloud Computing space.
"Now with one billion profiles and counting, Facebook has finally resolved this headache by entirely moving its myriad of operations to the cloud"
While a lot of Facebook's cloud size is kept as an internal secret, it likely holds data for more people than any other cloud service in the world. But even with these advances, it isn't Facebook we think will reap the biggest rewards.
GOOGLE IS ENORMOUS
Google recently reported that it now has six distinct properties with over one billion users: YouTube, Android, Search, Maps, Chrome, and Google Play.
All of this is powered by its cloud. In fact, if you're looking for the most impressive images of a cloud computing station, Google is it:
Google has a data center built next to the Columbia River. Each building in this data center is about the size of a football field."
In fact, articles have been published with names like "Google's worst-kept secret: floating data centers off US coasts." Here's an image:
But Google has gone even further. While placing its cloud data centers to sit on water creates a source of cooling and possibly even a source of power, Google has a patent for the project. Here's a rendering from the US Patent and Trademark Office from Google's filing:
Google may be taking the technology behind cloud computing to the absolute ends of human knowledge, but it isn't Google, either, that we think will profit most from the $500 billion Cloud revolution.
THE REAL WINNER
What everyone will tell you is that Intel will be the winner. For now, 99% of servers that sit in clouds are powered by Intel's Xenon chip. But that's the past. The future, as Google has shown, is far more complex, and demands far better technology.
The real winner behind the radical cloud computing boom is a mid-sized technology company based in the US and trading on the NASDAQ. Its chips enable artificial intelligence which can learn and improve without the assistance of human programmers.
Chips are being used to teach machines to think like humans.
While Intel's standard central processors are limited when it comes to doing multiple things in parallel, the technology gem that will power the cloud literally invented the technology that allows for the fastest and ost reiable parallel computing.
In fact, Apple just hired away this technology company's head of a division. This company already has Google, Tesla, and Amazon as customers. You have to dig deep, but you can even find a reference to the firm in the depths of the AWS documentation:
You can use this company to accelerate scientific, engineering, and rendering applications by leveraging the Compute Unified Device Architecture (CUDA) or OpenCL parallel computing frameworks
The 99% market share that Intel controls is vulnerable -- and even a chip off that market share stands to turn into tens of billions of dollars. This crown jewel of technology’s future is one of our few "Top Picks" for 2016. To find out which company we think will be the true winner in the massive cloud computing trend, join us at CML Pro and get the full research dossier.
WHY THIS MATTERS
Cloud computing will change everything about the way we use data -- our health, our national security, our streaming video, artificial intelligence and even the entire Internet. While our research pieces provide in-depth coverage of who is likely to dominate this theme, this is only one of CML Pro's precious 'Top Picks.' To find the 'next Apple' or 'next Google' we have to get ahead of the curve. This is what CML Pro does. Our research sits side-by-side with Goldman Sachs, Morgan Stanley and the rest on professional terminals, but we are the anti-institution and break the information advantage the top .1% have.
Each company in our 'Top Picks' is the single winner in an exploding thematic shift like artificial intelligence, Internet of Things, drones, biotech and more. In fact, here are just two of the trends that will radically affect the future that we are ahead of:
The Internet of Things (IoT) market will be measured in trillions of dollars as of next year. CML Pro has named the top two companies that will benefit. Then there's cyber security:
Market correction or not, recession or not, the growth in this area is a near certainty, even if projections come down, this is happening. CML Pro has named the single best cyber security stock to benefit from this theme.
These are just two of the themes we have identified and this is just one of the fantastic reports CML Pro members get along with all the visual tools, the precious few thematic top picks for 2016, research dossiers and alerts. For a limited time we are offering CML Pro at a 90% discount for $10/mo. with a lifetime guaranteed rate. Join Us: Get the most advanced premium research delivered to your inbox along with access to visual tools and data that until now has only been made available to the top 1%.
Thanks for reading, friends.