We are now entering “Tomorrow’s World”. As visions of the future become reality, the rise of tech is touching every part of the fabric of global politics, society and the economy. It is an enabler of growth and change for every business sector.
Industry 4.0, the rise of smart factories, and cyber-physical systems, for example, offer the potential for a step-change in reliability, safety and productivity. Similarly, smart-cities will see greater optimisation of physical infrastructure via predictive modelling and real-time data collection.
Technological advancements in fields such as artificial intelligence and virtual reality provide new business opportunities in new markets, and they raise the competitive barriers to entry for technology companies with strong credentials in these fields.
Trump tax offers tailwind for development
The new US administration’s tax plans include provisions for low-tax rates on foreign earnings repatriated to the US in order to incentivise companies to bring their cash onshore. This could be a major acceleration of advancement and a boon for shareholders.
For many of the major US technology firms holding substantial cash balances overseas, this incentive (if enacted) could lead to a significant amount of cash repatriated to the US for share buybacks, shareholder dividends, as well as US-based M&A, R&D and capital expenditure, all of which have the potential to enhance the fundamentals of the industry.
This change could have a tailwind effect on the four major themes driving the new wave of tech, which are destined to revolutionise our lives while offering investors plenty of opportunity.
Rise of artificial intelligence and machine learning
Major advancements in many of the underlying technologies such as deep learning, neural networks and natural-language processing have led to the creation of computing systems that understand, learn, predict and operate without human intervention.
These developments have catalysed the rapid growth of embedded intelligence within products and services, such as voice-enabled virtual assistants, autonomous vehicles and smart homes. In the future, we expect to see further progress in the capability of these technologies and an expansion in their commercial application across a number of industries, including health care, transportation and consumer services.
Key players within this area include those companies with strengths within the core buildings blocks of these technologies:
- Big data (Alphabet, Facebook and IBM)
- Semiconductor producers which enhance the processing power required to manage and interpret much vaster pools of data (Intel, AMD and NVIDIA)
- Hardware manufacturers in areas such as sensors, microphones and cameras required for data collection and interpretation (Sunny Optical, Mobileye and Infineon Technologies)
- Cloud computing services, as we believe that ultimately these functions will be offered to enterprises and end-users as a part of their overall cloud computing service (Amazon and Microsoft)
Virtual reality to become a reality
Computer processing capability has only recently become fast enough to power comfortable and convincing virtual and augmented reality experiences. Companies such as Facebook, Google, Apple, and Sony are deploying vast amounts of capital in order to make these experiences more immersive, comfortable, and affordable.
Over the next few years, we believe virtual and augmented reality capabilities will further improve and these technologies will be more widely integrated across PC, mobile and wearable devices. This will serve users in enterprise, education, and health care, as well as the more obvious applications in consumer and gaming industries.
Cyber-crime is on the rise
Cyber-crime is estimated to cost the global economy more than $400bn every year. With cyber adversaries growing increasingly competent and well-resourced, while entities and individuals continue to process and store a larger amount of their assets and information digitally, we believe that the frequency and impact of cyber-crime will continue to grow.
In the past, security has primarily been the responsibility of software and network providers. However, with the mass adoption of smart home devices and increasing connectivity in life critical situations, such as automobiles and medical devices, we believe that security will become a greater focus for hardware manufacturers (NXP Semiconductors and Cisco Systems).
Reaching a new level of scale
With approximately 2.5bn people using a smartphone device worldwide, technology has reached a new level of scale through a new form of computing (with cameras, sensors and sound). This, in our view will continue to provide a platform to change the lives of users and significantly alter the course of numerous industries.