The economics of cloud have shaken our technology and economic leadership to their core. If you were doing a list of technology leaders a decade ago, it would be obvious that computer giant International Business Machines Corp. (NYSE:IBM) and phone giant Verizon Communications Inc. (NYSE:VZ) would be there. Now, they’re not, as both acknowledged this week with VZ selling its remaining cloud assets to IBM.

They covered it up with happy talk about “unique cooperation between two tech leaders,” but make no mistake. This deal was an acknowledgement that neither company is one any more.

If Verizon were a tech leader it wouldn’t be selling. If IBM were, it wouldn’t be buying. There is a lesson for investors here as well. Go back 10 years, and neither VZ stock or IBM stock has done half as well as the Nasdaq Composite.

What Cloud Requires

Cloud requires a unique commitment of capital, $1 billion per quarter to start, which must be funded by cash flow from other, related operations.

In theory both IBM and Verizon should have had that cash. IBM had its mainframe business, VZ its phone business. But it was clear even 10 years ago that the mainframe business was on the way out. It was clear even 10 years ago that the wired phone business was being replaced by wireless, another huge capital sink.

Meanwhile Google, now Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), saw the cash for this coming from search. Amazon.com, Inc. (NASDAQ:AMZN) saw the cash for this coming from its commerce operations. After they made the leap into cloud, Microsoft Corporation (NASDAQ:MSFT) decided to fund the jump from software, Apple Inc. (NASDAQ:AAPL) decided to fund it from devices that support its own services, and Facebook Inc (NASDAQ:FB) made the historic decision to fund it from its social media operations.

Cloud is a complex set of technologies that puts those who commit to it on the leading edge of technology change.

The needs of cloud have created a “cloud Internet,” with major providers, data center real estate investment trusts and the biggest corporate and government operators linked by optical fiber. This is giving clouds the same features of redundancy and resilience as the Internet itself — you don’t see the “fail whale” any more.

IBM and VZ: Cloud Mania

There is a danger here for IBM stock and VZ stock, because just as cloud was a capital sink a decade ago, it is now a profit suck.

As the cloud move became a cloud boom, and now a cloud mania, the giant companies that committed to cloud have been sucking up the entire economy. Since the start of 2015, the gains in all five cloud leaders have beaten the gains of the Nasdaq, and this is from extremely high bases. Apple’s gain of 29% has come from a $500 billion market cap, and they’re the “poorest” performer of the group.

Companies that did not commit to cloud early enough, or hard enough, like IBM have just not gotten that performance.

IBM’s market cap today is $148 billion. Verizon’s is $187 billion. Facebook’s is $448 billion. Together, the former tech and telecom leaders aren’t worth what a social network is worth.

A Cloudy Future for IMB and Verizon?

This situation is unlikely to last. Right now, we don’t know the ultimate value of clouds, just as 20 years ago we didn’t know the ultimate value of an internet company.

Once we found out what an internet company could be worth, with the AOL merger into Time Warner Inc (NYSE:TWX), all other internet companies were discounted to that value, the value was seen to be extreme, and the result was the “dot-bomb,” the 2000-2001 market collapse.

Something like that may be ahead for cloud. It makes no objective sense for a wireless phone duopoly, with all its capital and cash flow, to be worth less than half what an ad-driven social network may be worth.

But that is a story for another time.

Dana Blankenhorn is a financial and technology journalist. He is the author of the political polemic Saving Trumpistan, Restoring Democracy,  available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in GOOGL, AMZN, FB, AAPL and MSFT.