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A key component for sophisticated investors and risk managers is identifying and adjusting for major market moves. This installment aims to address some nascent developments which are likely to have major impacts on current exposures.
Major market shifts are often caused by technology developments (i.e., new developments making prior offerings unappealing) and false assumptions (i.e., misunderstandings regarding the soundness of underlying investments). This piece aims to address the former issue.
Netflix challenged the video rental stores by mailing out copies of DVDs, thereby assisting customers in avoiding trips to the video rental stores and, for the most part, late fees. It was an adequate business, but the profit margins were low and sometimes nonexistent mainly because of the cost of acquiring customers, securing the DVDs, warehousing and shipping DVDs, and reprocessing DVDs. Along came the internet, and things have never been better. Nearly all of the non-copyright variable costs went away as a result of the shift to electronic distribution. Additionally, the shift to the internet enabled Netflix to expand internationally, thereby becoming THE powerhouse in the distribution of long-form video entertainment. The below growth in subscribers tells all:
With the massive growth, Netflix was able to backwards integrate and create its own content, and in the process received more than 160 Oscar nominations and over 30 wins, making it the most successful streaming studio at the Academy Awards to date1. Perhaps over time, Netflix will become a major player in live entertainment such as broadcasting and eventually creating sporting or music events thereby competing with a variety of established firms.
SpaceX has used its low-cost launch platform to launch thousands of satellites around the globe to create the Starlink network. As can be seen below, the growth has been stunning:
While still small compared to most internet and telephone providers, the total addressable market is the globe (with the exception of perhaps China and Russia) and the service is still young at 5 years compared to 30 for Netflix2. Furthermore, the marginal cost for adding subscribers is minimal as it does not even have copyright / production costs.
Impact: Given the fact that phone calls can easily be made over the internet (see Teams and other products), for some, Starlink might become an alternative to current telephonic landlines but without the limitation of geographic borders. Perhaps AT&T, Verizon, Comcast, and others will face increasing pressure.
It appears that over the relatively near future, fully self-driving vehicles will be a common feature accessed through a subscription. Instead of following the traditional approach of options added during production, a subscription model requires a manufacturer to produce cars with the same hardware, then paywall features after they leave the assembly line. The result is a simpler manufacturing process and high-margin, predictable ongoing cash flow. Further, manufacturers can still maximize the value of each customer. Note BMW had some pushback over heated seat subscriptions, though customers seem far more receptive to self-driving subscriptions.
While Tesla offers self-driving only on its own vehicles today, a far broader and higher-margin business has remained untapped to date: offering its software on other vehicles. The hardware for Tesla FSD is simple relative to other FSD systems. Further, it would sidestep Elon’s political issues. Many buyers do not want to support Elon’s businesses. However, that distaste is unlikely to extend to (for example) a Mercedes with a white-labeled self-driving feature, though it would be a Tesla computer under the hood. For Mercedes, the marginal cost of the hardware would be greatly outweighed by additional demand for their vehicles, not to mention some cut of subscription revenue.
Offering its self-driving software on other vehicles would allow Tesla to own the vehicle market much like Microsoft owns the PC market or Google and Apple split the mobile market. Tesla could even begin to push Android Auto and Apple CarPlay off that platform.
Lower-cost, higher-quality giga-press production, and long-range, fast-charging electric vehicles will become the norm. See the graph below for shifts over the past few years:
On balance, EVs are not yet materially less expensive than internal combustion engines (ICE). However, the dramatic shift will make EVs far more attractive. Full self-driving also will enable those customers who lack at-home charging to charge their vehicles overnight at another location, thereby sidestepping a major inconvenience.
As of a few quarters ago, all the tech giants were signing contracts for the building and leasing of massive data centers. While that continues, SpaceX has signed contracts providing billions in annual revenue:
Additionally, SpaceX now has the four major components needed for AI work:
•Compute: Colossus with over 1 million H100 equivalent GPUs
•Models: Grok and Grok Imagine
•Distribution: Cursor’s 1 million daily users
•Infrastructure: AI data centers
Impact: Just as AWS was able to dominate cloud computing by being an early adopter and pulling together all the necessary pieces (and offering integrated packages and bundled pricing), perhaps SpaceX is on a similar path.
Robots are now working on the Amazon warehouse floors and on various factory floors.
Impact: It is just a matter of time before robotics become more mainstream.
Technology has and continues to have a major impact on the business and credit environment. This installment aims to provide a framework for possible major shifts for the benefit of sophisticated institutional investors and risk managers.
1. List of accolades received by Netflix - Wikipedia: link.
2. Netflix chair Reed Hastings, The Guardian (Apr 16, 2026): link.
BMW heated-seat subscriptions: The Drive: link.
Netflix subscriber chart: Netflix earnings reports; year-end paid memberships (325M reported at year-end 2025).
Starlink chart: Starlink public milestone updates and reporting on Starlink statements; figures are reported public milestones, not audited counts.
EV battery / range chart: BloombergNEF battery price surveys (2014-2025); U.S. federal EV range data summarized by MarketWatch.
Total-cost-of-ownership chart: Vincentric 5-year EV cost-of-ownership analysis; Consumer Reports; DOE AFDC vehicle cost calculator. Illustrative.
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