In the last decade, many new technologies have transformed the developed world. In many cases, the lion’s share of the profits and/or revenue from each of those technologies has gone to one company, tremendously boosting its stock in the process. For example, Apple (NASDAQ:AAPL) has earned most of the profits from smartphones, almost all of the profits from streaming video have gone to Netflix (NASDAQ:NFLX), Nvidia (NASDAQ:NVDA) has gotten much of the profits from chips for artificial intelligence and Tesla (NASDAQ:TSLA) has gotten a huge share of the revenue from electric car sales (in the U.S.).
But as these technologies mature and become more popular and lucrative, it’s natural for strong competitors to arise in each of these new industries. In 2019, it’s apparent that these companies will indeed encounter much more intense competition.
Unless these companies unveil new or improved features or products, Apple, Netflix, Nvidia and Tesla are likely to be meaningfully hurt by their significantly beefed-up competition.
Apple Stock Facing Tougher Competition From China, Samsung
Three Chinese companies have launched mobile phones that are successfully taking on Apple’s iPhone, which accounts for the majority of the American giant’s revenue and profits. If, as I expect, the smartphone market share of these Chinese companies significantly increases in 2019, causing iPhone’s market share to decline further, Apple stock is likely to take another big hit.
In August, Bloomberg reported that China’s Huawei had passed Apple to become the world’s second most popular smartphone, behind Samsung. In an effort to differentiate itself from Apple and Samsung, the Chinese company has incorporated a “three-lens camera” and “a shiny, rainbow-effect handset finish,” Bloomberg noted. Huawei’s flagship smartphone costs about $800 in China, meaningfully cheaper than the roughly $1,000 that AAPL is charging for its top iPhones.
Meanwhile, two other Chinese smartphone makers — Xiaomi and Opp — have gained market share at Apple’s expense in multiple large countries, including China, India, Indonesia and the Philippines, The Wall Street Journal noted. Look for that trend to intensify in 2019 as these Chinese companies become better known around the world.
“Apple’s arch-nemesis, Samsung, is reportedly going to unveil a foldable phone by the end of this year. Samsung indicated that the phone, when unfolded, will have most of the same attributes as a tablet. Thus, users could have the best aspects of a phone and a tablet on the same device. I believe there is a great chance that the new device will become a big hit, badly hurting sales of both the iPhone and the iPad.”
Netflix Facing Tougher Competition From Disney, Plex, Amazon
Lango also noted that the conglomerate recently acquired much of Twenty-First Century Fox’s (NASDAQ:FOX) substantial TV and movie content and is slated to launch its own streaming content service in late 2019. Between Disney’s impressive content, its loyal following and its ability and motivation to spend a great deal on marketing (as Lango points out, it needs a way to counter the cord cutting phenomenon), Netflix will be facing much tougher competition than it ever has before.
And although Disney’s service isn’t slated to launch until late next year, rest assured that investors will start to become very worried about Disney’s service and its impact on Netflix stock by the second quarter.
I hadn’t heard about the streaming service called Plex until my girlfriend’s sister told me about it a few weeks ago. But it appeared to have nearly all of the newest movies and many more currently popular TV shows than Netflix (think, for example, Big Bang Theory and Modern Family). But it’s actually apparently quite cheap, apparently costing only $5 per month or $40 per year. That’s much cheaper than Netflix!! If many Americans find out about Plex in 2019, NFLX and Netflix stock could be in trouble!
Nor, apparently, is Netflix’s longtime rival, Amazon (NASDAQ:AMZN), standing still. As entertainment news website Uproxx puts it:
While Netflix features more and better original programming, Amazon Prime holds their own in that department, and they continue to beef up their offerings. As far as licensed content goes, however, Amazon Prime may hold a slight edge, thanks to owning exclusive rights to HBO’s back catalog.
Among Amazon’s shows that Uproxx raves about are The Americans (Uproxx says it has great “relationship drama”), Justified (it has “the two most charismatic characters around” and “engrossing … stories,” the website stated,) and The Wire, which Uproxx calls “a one-of-a-kind series, a show that is not only entertaining, thoughtful, and insightful, but also necessary.”
Finally, we can expect other, newer services like Dish Network’s (NASDAQ:DISH) Sling and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube TV to gain more traction against Netflix next year as they use word-of-mouth and digital marketing to gain more of a foothold in the streaming market. And even if tens of thousands of subscribers don’t desert Netflix for these rivals, their presence will likely prevent the company from raising its prices, as some bulls contend that NFLX can easily do.
Tesla Stock to Face Tougher Competition From Multiple Automakers
In August, Karl Brauer, an analyst at Kelley Blue Book, told CNBC that Tesla will face much more competition down the road.
“Everyone is jumping into electric (vehicles). Tesla is going to face increased competition. They’re not going to be the lone player with a 200-plus mile EV which Tesla was for about a decade. In another couple of years, there will be a lot of competition for them … globally as well as in China,” he said.
Indeed, among the companies “jumping” into the electric car battle next year are two very-well-respected European automakers with great brand names: Porshce and Audi. Porsche is launching the Taycan, an all-electric sedan. Audi recently unveiled the e-Tron Quattro SUV, but sales of the vehicle will likely heat up next year.
Another such company, Mercedes-Benz, is slated to start selling an electric SUV with 200 miles of range in 2020 in the U.S. , but buzz about it will likely begin next year. In China,start-ups Byton and Nio (NYSE:NIO) are launching promising electric vehicles, while European automakers Renault and Daimler (OTCMKTS:DDAIF) are among the foreign automakers looking to enter the rapidly growing Chinese EV market.
With a hefty price-to-sales ratio of over 3.5, Tesla stock could easily drop sharply on any hint of a major competitor’s offering becoming in vogue.
Nvidia Stock to Be Challenged in AI Chips
The artificial intelligence (AI) chip market has been “dominated” by Nvidia. Indeed, that dominance was arguably the biggest single reason for the meteoric rise of Nvidia stock from around $20 in mid-2015 to nearly $300 earlier this year.
Perhaps one reason why Nvidia stock subsequently slumped to around $150 is that knowledgeable investors are aware that NVDA will face increased competition in AI chips soon.
For example, Japanese industrial company Fujitsu earlier this year launched a deep learning accelerator card, and Microsoft (NASDAQ:MSFT) recently unveiled “ONNX Runtime, a high-performance inference engine for machine learning models.”
Meanwhile, subsidiaries of Amazon and Intel (NASDAQ:INTC) recently unveiled new AI chips. According to Analytics India, Amazon’s Inferentia chip “is made to deal with large workloads while requiring lower latency.” Meanwhile, Intel’s Myriad 2 AI chip “utilised for some of the most ambitious AI, vision and imaging applications involving both enhanced performance and low power consumption,” Analytics India reported.
Additionally, Huawei says that its chip “processes more data in a faster amount of time than its competitors” and Alphabet is looking to use its new chips to reduce its dependence on Nvidia. Alphabet’s new AI chips are supposed to be faster than current offerings. NVDA needs to be careful.
As of this writing, Larry Ramer did not own shares in any of the companies mentioned