As headlines continue to tout technology as one of the key drivers of economic growth now and in the future, we find ourselves wondering just what this technology ecosystem really is, how the pieces fit together and which companies participate in which part of this world. Since we are asking, we expect some of you are too.
The simplest explanation we found suggests that the technology industry is a pyramid. The growth prospects for each of these components can be different. See summary table below.
- The foundation is made up of companies which design and manufacture computer processing and memory chips.
- These are semi-conductor and computer chip firms.
- Computer chips are tiny pieces of semiconductor material.
- The next layer is companies which build devices and equipment of all types.
- These firms build the machinery needed to produce the semiconductors and the chips.
- Next are the actual device manufacturers.
- The devices are the pieces we use, like our Smartphones and computers.
- Networking/infrastructure is next layer.
- Next are computing cloud providers.
- These companies have massive data centers and rent computing power to businesses.
- There is a separate layer just for AI platforms
- The next layer has software companies.
- These run on the hardware and cloud infrastructure layers.
- And at the top are the cybersecurity companies which protect the networks and data.
| Layer | What These Companies Do | Representative Public Companies | Industry Growth Outlook |
| AI & Processing Chips | Perform AI calculations and computing tasks | NVIDIA, Advanced Micro Devices, Broadcom | Very Strong |
| Memory Chips | Store data used by computers and AI systems | Micron Technology, Samsung Electronics, SK Hynix | Strong |
| Semiconductor Equipment | Build the tools used to manufacture chips | ASML, Applied Materials, Lam Research, KLA Corporation | Very Strong |
| Hardware & Devices | Build computers, phones, and servers | Apple, Dell Technologies, HP Inc. | Moderate |
| Networking & Infrastructure | Connect data centers and businesses | Cisco Systems, Arista Networks, Juniper Networks | Moderate to Strong |
| Cloud Computing | Rent computing power and storage | Microsoft, Amazon, Alphabet | Strong |
| Foundation Models (AI Platforms) | Build AI and monetize (large language) models | Anthropic, OpenAI, xAI, Google DeepMind, Meta AI | Strong |
| Software | Create applications used by businesses and consumers | Oracle, Salesforce, Adobe, ServiceNow | Strong |
| Cybersecurity | Protect networks and data | Palo Alto Networks, CrowdStrike, Fortinet, Zscaler | Strong |
The technology ecosystem framework shown above is adapted from commonly used industry classifications and research published by MSCI/S&P GICS, Gartner, IDC, and the Semiconductor Industry Association. Company examples are illustrative and not recommendations.
What About Growth?
The biggest growth driver is artificial intelligence. AI requires advanced chips and massive data centers which has increased demand for semiconductor companies, chip manufacturers, chip equipment makers, AI platforms and cloud providers. Cybersecurity is also benefitting as companies become more digital. On the other hand, computers, smartphones, and basic networking equipment are likely to be slower growing areas.
Linder Financial Services is a dba of Thayer Partners LLC, (“Thayer”). Thayer is an SEC registered investment adviser. SEC registration does not constitute an endorsement of Thayer by the SEC nor does it indicate that Thayer has attained a particular level of skill or ability. This material prepared by Thayer is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Opinions expressed by Thayer are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Thayer, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Thayer does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice.
