Eric Schmidt, former chief executive of Google, often makes waves. Last month, however, he created a ripple that should be noted by investors in technology stocks — not to mention anyone tracking the fractious relationship between the US and China.

Speaking at a private event in Silicon Valley, Mr Schmidt predicted that cyber space is heading for a historic rupture. Hitherto, the internet has existed as a (mostly) integrated global platform, on which money, information and ecommerce have zipped seamlessly around the world. Mr Schmidt fears this could be about to unravel.

“I think the most likely scenario [in the next 10-15 years] is not a splintering [of the internet] but a bifurcation into a Chinese-led internet and a non-Chinese internet led by America,” he observed. “I think you’re going to see fantastic leadership in products and services from China.”

Another factor driving this rupture is that China has “a different leadership regime . . . with censorship, controls, etc”. Just look, for example, at the (in)famous “great firewall of China”, the cyber screening system that Beijing uses to keep out unwanted foreign internet content.

Also important is the way China is using the Belt and Road Initiative and financial leverage to bring other countries under its sway. Mr Schmidt observed that the initiative involves “60-ish countries”, and noted that in the future “it’s perfectly possible those countries will begin to take on the infrastructure that China has” — instead of the US-led platform that currently dominates. Or, to put it another way: the risk now is of a 21st-century version of the Soviet-era Iron Curtain, a cyber curtain splitting the global internet in two.

Some of the Silicon Valley cognoscenti might yawn at this prediction. Five years ago Mr Schmidt co-authored a book with his former colleague Jared Cohen which raised his concerns about a possible “splinternet”. And today the issue is a well-established topic of debate among tech insiders. As an influential tech chief executive observed last month: “Most of us don’t want to say this in public, but we agree with what Eric says.”

But if Silicon Valley has long been concerned with the issue, most economists or investors are only slowly waking up to the risks — and implications. Think, for example, about Facebook. Four years ago, its co-founder and CEO Mark Zuckerberg chirpily told investors that “products don’t really get that interesting to turn into businesses until they have about a billion people using them”.

That might (almost) make sense in a world with 3bn internet users who are seamlessly integrated. But if Mr Schmidt’s prediction turns out to be true, sunny assumptions about the future size of the internet user base — and market — may need to be revised. “These numbers, like the growth plans of many Silicon Valley darlings, are predicated on an assumption that the internet will remain a unified, global platform reaching more and more markets,” said Chris Mondini, of the Internet Corporation for Assigned Names and Numbers (or Icann, the global body that maintains the internet protocols), after Mr Zuckerberg’s prediction.

Some optimistic tech investors might reply that Mr Schmidt is just being alarmist — or playing a subtle lobbying game to scare the American government into taking more action to defend the internet. Some rivals even wonder if Google is trying to protect its own commercial interests in China. The company has recently been exploring whether it should launch a censored search engine in China, called Project Dragonfly.

In any case, optimists argue, there are still plenty of companies and institutions in both America and China with a vested interest in preventing a splintering of the internet.

Meanwhile, groups such as Icann continue to take measures to ensure that the roots of the net remain connected — whatever happens to the platforms. “Even in a world which is becoming increasingly nationalistic and fragmented there’s a great deal of co-operation that takes place at a technical level,” says Mr Mondini.

But the next time that China and the US exchange blows, investors should remember Mr Schmidt’s prediction. The cyber curtain is not here yet. But if it does ever materialise, the impact could upend many market assumptions — starting with tech stocks.

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