Salient to Investors:

A Bernstein Research study “Do High R&D Spenders in Tech Generate Stock Outperformance?” found:

  • Over 1, 3, 5, and 10-year periods, the companies with the lowest spending on R&D tended to perform the best on Wall Street.
  • Over the past 5 years, stocks in the biggest R&D spenders underperformed by 15 percent on average. The middle R&D spenders outperformed by 23 percent on average, while the lowest spenders outperformed the rest by 19 percent.
  • 63 percent of the low spender, 43% of the middle spenders, and 40 percent of the high spenders outperformed their peers.
  • Chip companies suffer from being locked in a constant battle with the laws of physics to build tinier, faster, cheaper things to compete.
  • Many of the high R&D spenders were underdogs trying to compete above their weight.
  • Large companies can spend less but make more of their R&D investments through high R&D productivity.

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