The rise of blockchain could threaten the internet dominance of FANG companies — Facebook (FB), Amazon.com (AMZN), Netflix (NFLX) and Alphabet‘s (GOOGL) Google — as the database software technology decentralizes the web, says one Wall Street analyst.
“We believe that blockchain technology will be as important as the internet was to economic and social change in the past 25 years,” Oppenheimer analyst Tim Horan said in the report to clients. “With blockchain, the community of users owns and pays for the servers instead of having a centralized organization like the FANGs, driving better innovation.”
Blockchain is the software technology behind Bitcoin and other cryptocurrencies. It’s a shared public ledger, which tracks transactions and ensures that the record of those transactions remains transparent and tamper-proof.
The FANG companies have accounted for much of the Nasdaq’s gains in recent years due to their dominance in social media, e-commerce, and internet search.
Facebook Blockchain Division
Facebook is launching its own division devoted to the technology as part of a restructuring, it was reported in early May. Google has invested in several related startups. Plus, Google’s cloud computing business is working on blockchain-related technology, Bloomberg reported.
Amazon Web Services, the cloud arm of the e-commerce giant, also has stepped up development of the technology. Horan, though, sees Microsoft (MSFT) as moving quicker among potential for blockchain stocks.
Leading Blockchain Stocks Wave
“Microsoft was the first to automate the set up of private blockchains while integrating with cloud Azure services,” said Horan. “Microsoft leads in providing Blockchain-as-a-service (BaaS), but Amazon is investing as are all system integrators.”
The Oppenheimer analyst says smart contracts that enable the technology will be key. Smart contracts are programmed into blockchains to automate tasks — for example, processing insurance claims — when preconditions are met.
“Smart contracts on blockchain will drive unimaginable use cases that will forever change the tech landscape,” said Horan. “This type of change has historically driven new leadership and disrupted incumbents – (maybe next) FANGs?”
Facebook rose 2.2% to close at 191.78 on the stock market today. Alphabet surged 2.1% to 1,100. Amazon rose 0.3% to 1,629.62. Netflix was down 0.5% to 351.60. Microsoft dipped 0.3% to 98.84.