Brian Colello: We think Facebook has a wide moat based on intangible assets around the data that it owns. It has enough data about users that it can allow advertisers to better target customers, get a better return on their investments, and in turn, Facebook's able to capture better pricing. That's what contributes to a lot of our high growth rates for Facebook over the next decade.
Now, if that data is at risk, and I think there's two ways why this data is at risk, certainly that would be a negative for the firm and that would lead to part of the sell-off.
The first one is the awareness of users that their data is being captured. We might see users use Facebook less often, maybe depart from the platform altogether. We think Facebook is buffered a little bit because it owns Instagram. And we still think people want to be part of social networks. But that's certainly a risk.
The other one is regulation based around data. It's very possible that in Europe, and perhaps even in the U.S. and other places, that Facebook will be unable to collect as much data as it had, or be able to have the specific data about each user that will create a return for advertisers. This might weigh on pricing, and again, limit revenue.
In addition to Facebook, we also saw a sell-off in Nvidia after their analyst day. One of the big issues that occurred was the unfortunate accident with an Uber self-driving car that killed a pedestrian. Uber suspended its self-driving program; Nvidia's taking a look at theirs as well. This might delay the profitability and the revenue coming from companies with autonomous driving exposure. We still think these investments will be made longer term, but certainly that led to the weakness yesterday as well. We still think Nvidia's significantly overvalued however, so that sell-off is welcome news in our eyes.
Looking at Facebook and Nvidia, in particular, we think it probably led to a sell-off in the entire sector. We saw Netflix, a lot of other highfliers sell off as well. There's probably very related trading in terms of FANGs, in terms of high-flying growth stocks in technology. They all rose over the past year, so some of them are significantly above our fair values. We think the pullback in these stocks is healthy at this point, but we're not surprised to see them selling off in the same way that they rose six, 12 months ago.
