The Rise of Conglomerates 2.0: Decoding Business Evolution Through Theia Insights Industry Classification (TIIC)

Author: Ye Tian, Theia Insights

Is Amazon a retailer, a cloud computing giant, or a media company? Is NVIDIA just a chip maker? What do Tesla and First Solar have in common?

In today's rapidly evolving economy, understanding what companies do has become increasingly challenging. As businesses expand into adjacent markets, make acquisitions, pivot, and transform their core operations, simple industry labels no longer tell the full story. The question “What does a company do?” has become increasingly difficult to answer—and even harder to quantify.

Theia Insights Industry Classification (TIIC) offers a new way of understanding this shift. TIIC consists of two key components: 1) a dynamic taxonomy and 2) company classifications. As a self-learning system, it continuously processes company filings, earnings reports, transcripts and other unstructured text sources. The taxonomy discovers the complete spectrum of industries and themes, while the classification model creates a one-to-many mapping between companies' business activities and themes, revealing "who does what by how much" in real time, providing investors and businesses with a clear view of the market.

‍The Evolution of Themes

‍Themes rise and fall like tides. The following data visualization from the TIIC’s Electronics & IT Sector is an example of how themes have changed over the past decade. Cybersecurity has grown beyond specialized tech firms and now touches every industry, from finance to retail, as companies strive to safeguard data in an increasingly digital world. Artificial Intelligence has evolved from theoretical research into a mainstream component of business operations.

However, companies exposed to these themes are rarely confined to just one area. Instead, they often span multiple interconnected and even seemingly unrelated themes in the new era of Conglomerates 2.0.

Figure 1: Evolution of themes in TIIC Electronics & IT sector. Position indicates rank among other themes, thickness indicates the number of companies exposed to the theme.‍

‍The Rise of Conglomerates 2.0

‍Traditional industry classification systems assign companies a single industry label and one such label is "conglomerates." Today's conglomerates, however, look nothing like their 20th-century predecessors. Rather than owning disparate businesses, modern businesses often integrate multiple complementary business lines.

Take NVIDIA for example. While traditionally viewed as a semiconductor company making graphics cards, TIIC reveals its exposures span multiple themes, including semiconductors, data center & high-performance computing, AI, software, and video games, among others. Importantly, a company’s business exposures often differ from its revenue breakdown, as exposures can capture forward-looking strategies and growth areas. Many companies with significant exposure to AI saw it reflected in their valuations well before it became apparent on their income statements.

Figure 2: TIIC Level 4 (major themes) Exposures for NVIDIA - data of Sept 2024

The Power of Network Effects

‍What sets Conglomerates 2.0 apart is a powerful network effect. Companies compete and collaborate across industries, creating a web of relationships that traditional classification systems overlook. For instance, a breakthrough in AI doesn't only impact technology companies — it ripples through industries such as automotive and healthcare.

For investors, understanding these hidden connections is crucial. The essential question isn’t just “Is this company in tech, healthcare, or finance?” but rather, “Who does what by how much?” and “How does a theme connect to the broader ecosystem?” TIIC reveals these hidden connections, helping investors see emerging themes, uncover true exposures of companies, anticipate how changes in one theme might influence others, and better assess portfolio diversification and risk.The rise of Conglomerates 2.0 represents a shift in how businesses operate, compete and grow, making a dynamic one-to-many industry classification essential for navigating tomorrow's market landscape.