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The Internet Boom Is Far From Over

August 13, 2020 By Mircea Vasiu

The recent surge higher in the stock market prices led to investors questioning the fundamentals. It simply does not make any sense to bid for tech and Internet companies at such high valuations – right? 

But if as an investor you aim at putting your capital at work in lucrative businesses, with high future potential, Internet businesses fit the bill. Companies like Microsoft, Amazon, Zoom, Alphabet – the ones driving the move higher in stocks today, stand to benefit the most from the number of people projected to join the World Wide Web in the years ahead.

Great Opportunities for Growth

South Asia represents the greatest area with growth potential – a billion people are still unconnected, with India leading the pack with almost 700 million people. No wonder Amazon invested heavily in India and considers it one of the key markets in regards to future growth potential.

However it is not only about the emerging or frontier markets. The United States alone added two million new Internet users in the last twelve months, as connectivity reaches the most difficult areas. Northern European countries have the highest connectivity level, with Sweden and Norway reaching almost full levels.

In other parts of the world, however, there is still a long way to go until full connectivity. It reflects the potential ahead for Internet companies and the ones that offer adjacent products and services. If you want, it represents the big picture, the market potential, the reason why these companies grow at astonishing rates and are likely to continue to do so.

That is particularly important in an age when globalization takes a step back. Because people travel less, go out less, and stay more inside, they consume more Internet and Internet products. Computers, phones, software – anything that facilitates access to the Internet are already in high demand. Any company providing goods and services related to computers, phones and software is doing much better now then pre-crisis.

The number of unconnected people shows how much more lies ahead. Hence, the tech companies are far from being overvalued. Yes, the current valuation levels are sky-high if we use current metrics. But at the moment that one looks at the bigger picture and couples that with the change in consumer behavior, everything pales in front of the potential.