There are several key trends thatdefine the world economy and global stock markets. One is the rise of China and India. Following on from this is the boom in consumerism, as emerging market middle classes grow and start to spend. And the third is the increasing domination of technology.
Moores Law predicted the future of the technology industry
How long can a trend continue? Well, techs roots lie in the invention of the microprocessor. In 1971 Intel launched the 4-bit 4004 chip, and a year later produced the 8-bit 8008 processor. Little did people know, but this was the beginning of a trend thats lasted longer than anyone could have believed.
In a paper published in 1965, Gordon E Moore, the cofounder of Intel, came up with an interesting idea. He said the number of transistors ina microprocessor would double roughly every two years. There washardly anytalk about this concept at the time, but Moores Law basically predicted the future of the technology industry.
Since that paper weve had the Z80 chip, the 68000, the 486, the Pentium and the Core i7. Weve had the Commodore 64, the IBM PC, the Apple Mac and the iPhone. All the way from the first microprocessor in 1971, up to 2011, the transistor count has doubled every two years.Over 40 years that wasan increase in processing power of 2 to the power 20, orone million times.
The end of Moores Law is in sight, but that wont stop tech
In the early 1970s, the first primitive computer games of bat and ball were invented. Today, computers are so advanced that the graphics in modern consoles are virtually photorealistic. Alphabet Inc, the company formerly known as Google, (NASDAQ: GOOGL) is increasingly becoming an AI company, using computer intelligence to do everything from web search, to driving cars and creating art that ranges from therather spooky, to paintings you could have sworn were by Rembrandt. Computers can now play chess, Go and Jeopardy rather better than humans can.
Alphabet is now far more than just an internet search business. The fact that it has chosen the name Alphabet suggests that it will cover every aspect of technology which, by extension, means it will cover every aspect of life. Thats why, althoughyou might be a little late to the party,the share price will keep rising.
Likewise the computer chips designed by ARM (LSE: ARM) were once niche processors, while the Intels of this world took the bulk of the market. But today, ARM chips are ubiquitous, and are now more common than Intels designs. Youll find ARM chips in just about every smartphone in the world, in tablets, in cars, in washing machines and, eventuallyI suspect, even inside the traditional computers thatIntel once dominated.
Yet, justa few years ago eagle-eyed tech watchers will have noticed that the pace of advancement has slowed. The latest chips have 14 nm technology. Once we get down to about 7 nm, quantum effects start to interfere with processor function. The end of Moores Law is in sight.
But Imso optimistic aboutscientific advances that Ithink itwont stop tech from taking over every aspect of our lives.Not onlyare we approaching a world of all-pervasive technology,but were onlynow beginning to understand just whats possible.
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Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (A shares). The Motley Fool UK has recommended ARM Holdings. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
