by Amanda Harvey
Moore’s Law has its
basis on the observation made in 1965 by Intel co-founder, Gordon
Moore. His recognition was that the density of transistors on integrated
circuits had doubled in each year since their invention. Moore’s
observation, which subsequently became known as Moore’s Law, proposed
that a high rate of increase in transistor density would continue for
the foreseeable future. The rate of density increase was showing at
double in about every 18 months and then in 1975 Moore adjusted the
forecast to expect a twofold increase every two years.
What is the Future of Moore’s Law?
This rate of increase has proved accurate until now, 50 years after the
initial observation made by Moore. It has come into question, however,
whether this increase can continue at the rate suggested by Moore’s Law.
It should also be noted that while it is referred to as a “law,” in
fact, it is really a projection or observation, rather than an actual
physical law. While many experts agree that Moore’s Law will continue to
hold true for at least a couple more decades, others believe that
physical limitations will be reached, which would affect an end to the
law.
What is the Impact of Moore’s Law on Computing?
David House, also of Intel, predicted that the combined effect of
greater transistor density, and also the increase in their speed, would
result in computer chip performance doubling every 18 months. This
increase in productivity is also complemented by the fact that while the
effectiveness of computing is doubling, the cost is dropping by about
half in each 18 month period.
The Relationship between Moore’s Law and the Stock Market
The effect of this consistent exponential increase in technology
capability has reached across almost every economic sector, influencing
productivity and economic growth.
Moore’s Law has, in particular, had great impact on the stock market,
and the pace at which change takes place. There are many aspects of
stock market trading in which we can see evidence of how rapid
advancement in computer technology influences the markets and the whole
trading process.
Moore’s Law and the Stock Market - The Method of Trading
At a fundamental level, the effectiveness and accessibility of
technology has changed the way most traders operate, and the efficiency
with which they are able to trade. With the instant access to placing
the trade as well as obtaining information provided by online trading, traditional trading through a broker has become far less prevalent.
Moore’s Law and the Stock Market – Greater Investment Opportunities
There is also the availability of an ever-increasing range of investment
opportunities both within the technology sector, and within other
sectors influenced by technology (which encompasses just about
everything!). There are around fifty times as many shares listed on the
stock market as existed when Moore’s Law was first appeared.
Moore’s Law and the Stock Market – Vastly Increased Trading Volume
The computing power available has also facilitated the trading of a
rapidly increasing volume of shares. The number of shares traded in the
whole decade of the 1960s (close to 17 billion shares), was surpassed in
just 4 days of trading in 2011. In the 1960s, the annual average share
turnover was 17%, while the annual average between 2008 and 2011 reached
almost 300%.
In fact, as you can see in this graph, the increase in transistor
density has been mirrored fairly accurately by the increase in volume of
share trading on the New York Stock Exchange.
Sources: The Economist, also Intel and Euronext
A Final Note on Moore’s Law and the Stock Market
While there are obviously notable connections between the enormous
advancements in technology signified by Moore’s Law and the stock
market, there are clearly many other factors which also contribute to
the continued growth and evolution of the economy, the financial sector
and the stock market.