LTP Notes 013: Apple Needs a New Product, AWS is Losing Market Share, Tobacco is Profitable, and Others
Some investing notes that may help you gain insights or make long-term decisions.
In case you’ve missed the previous notes:
Content:
↗️ Key Drivers of US Economic Growth
🛍️ Amazon’s Ad Business is Dominating
🖥️ Explosive Data Center Growth
💻 PC Market Leaders
🪙 Central Banks Are Buying Gold
📈 NVIDIA's Data Center Growth
📉 AWS is Losing Market Share
🤖 GPU Market $1.4T in 10 Years
🚬 Tobacco is Profitable
🍏 Apple Needs a New Product
↗️ Key Drivers of US Economic Growth
Since 1990, personal consumption (red bars) has been the biggest driver of U.S. GDP growth. Investment (purple bars) plays a major role but is volatile—collapsing in crises like 2008 and 2020. Government spending (blue bars) helps stabilize downturns, while net exports (gray bars) often drag on growth. The sharp dip in 2008 (Global Financial Crisis) and 2020 (COVID-19) shows how recessions hit the economy hard, followed by strong rebounds.
🛍️ Amazon’s Ad Business is Dominating
Amazon’s digital ad revenue hit $56.2 billion in 2024, growing ~20% year-over-year. The company now controls 76% of U.S. retail media ad spend, far ahead of competitors. For perspective, YouTube’s ad revenue is $36.2 billion, making Amazon’s ads business 35% larger. As brands shift budgets to retail media networks, Amazon is emerging as a major ad place.
Stocks to watch: AMZN, GOOGL, META, TTD (The Trade Desk).
🖥️ Explosive Data Center Growth
The demand for global data center capacity is projected to grow at 22% CAGR until 2030. Generative AI workloads are the key driver, expected to surge at 39% CAGR. Other workloads grow at a slower 16% CAGR. By 2030, advanced AI workloads will make up a much larger share of total data center capacity.
Stocks and ETFs to watch: NVDA, AMD, SMCI, AVGO, AMZN, MSFT, GOOG, EQIX, DLR (REIT).
💻 PC Market Leaders
The PC market has changed a lot since 2006. Three companies now control most of the market - Lenovo, HP, and Dell. Together, they hold about 65% of all PC shipments worldwide. This shows how the market has become more concentrated, with smaller players losing ground.
Lenovo has grown the most, going from just 7% in 2006 to about 25% market share. Apple has also made progress, especially after introducing M1/M2 chips, while companies like Acer and Asus have stayed steady but smaller.
Stocks and ETFs to watch: LNVGY (ADR), HPQ, DELL, AAPL, XTH (Technology Hardware ETF), SMH (VanEck Vectors Semiconductor ETF) - because PC makers depend on chip supplies.
🪙 Central Banks Are Buying Gold
The relationship between gold prices and central bank reserves tells an interesting story. While gold's share in reserves dropped from 50% in 1968 to about 8% by 2008, it's now moving up again, reaching about 15%. At the same time, gold prices have risen from under $100 in 1968 to almost $3,000 today. This recent increase in gold reserves shows that central banks are getting more interested in gold again.
📈 NVIDIA's Data Center Growth
NVIDIA's data center business is set to explode, showing the huge impact of AI on the company's future. Data center revenue is expected to grow from about $15 billion in 2023 to nearly $180 billion by 2031. We can see a steady growth throughout the whole period. Data center revenue becomes an increasingly large part of NVIDIA's total business, making up most of the company's revenue by 2031.
Stocks and ETFs to watch: NVDA, SMH (VanEck Semiconductor ETF), SOXX (iShares Semiconductor ETF).
📉 AWS is Losing Market Share
The cloud computing market is showing an important shift. AWS (Amazon Web Services) is still the biggest player, but its market share has dropped from 61.7% to 52.5% over the last few years. Microsoft's Azure is the big winner, growing steadily from 27.3% to 33.3%. Google Cloud (GCP) has made smaller gains, moving from 11% to 14.1%.
The cloud market is becoming more competitive, with Azure taking on AWS.
Stocks and ETFs to watch: AMZN (AWS exposure), MSFT (Azure growth), GOOGL (Google Cloud potential), SKYY (First Trust Cloud Computing ETF), WCLD (WisdomTree Cloud Computing Fund), CLOU (Global X Cloud Computing ETF).
🤖 GPU Market $1.4T in 10 Years
The GPU market is about to see incredible growth, driven by AI, gaming, and data centers. The numbers are huge - starting at $75.77 billion in 2024, the market is expected to grow to $1.4 trillion by 2034. This means the market will grow about 18 times larger in just 10 years. The growth gets faster each year, showing how GPUs are becoming more important for new technologies, especially AI and machine learning.
Stocks and ETFs to watch: NVDA, AMD, INTC, SMH (VanEck Semiconductor ETF), SOXX (iShares Semiconductor ETF).
🚬 Tobacco is Profitable
Big differences between industries 1990-2021. The most profitable sectors are on the left side, with tobacco, household products, and pharmaceuticals leading with ROICs above 10%. On the right side, utilities and telecom services show much lower returns, often below 5%. What's interesting is that the most profitable industries tend to be those selling products people need regularly or those with strong brand power.
Stocks and ETFs to watch: XLP (Consumer Staples ETF), VDC (Vanguard Consumer Staples ETF), IYH (Healthcare ETF) - for pharmaceutical exposure, MO (Altria Group) - tobacco industry, PG - household products leader, JNJ - healthcare/consumer products mix.
🍏 Apple Needs a New Product
Apple’s products have been struggling in recent years. iPhone sales have been flattish, while sales for other product lines are declining. Vision Pro hasn’t been as much of a success and Apple has stopped working on cars. It seems they need a new product.
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Apple will innovate in some time. Mark my words