Enablers of smart technologies
Humanity is reaching an important new stage of development: the knowledge economy is increasingly at the core of our activities. To enable innovation, a number of disruptive technologies, such as 5G and Artificial Intelligence, are required and being rolled out.
In turn, these technologies are spurring demand growth in semiconductors, infrastructure, storage and cybersecurity, enabling Big Data processing and consumer profiling.
This is a global equity theme.
It is a core long-term holding intended to figure prominently among other investments in megatrends.
This theme is still in its infancy and will take several years before it reaches a certain degree of maturity. Sales and earnings growth rates will be impressive in the foreseeable future.
5G: the door to myriad new opportunities
5G is the fifth generation of wireless technology. Thanks to internet speeds that can be up to 100 times faster than 4G, new frontiers such as autonomous driving, robotic telesurgery, the Internet of Things and virtual or augmented reality can be realistically explored. The 5G market is in its infancy but its potential in enabling a wide array of technologies is huge. According to the specialist technology market intelligence firm CCS Insight, 5G connections worldwide will explode from 250 million in 2019 to 3.6 billion in 2025! To build this market, huge spending will be required in this decade and probably beyond. Investments will range from equipment such as networking equipment, cellphone towers, semiconductors and phones to services (such as telecom, cloud, smart mobility, gaming).
Artificial Intelligence: the knowledge-based economy is counting on it!
According to Wikipedia, 'Artificial intelligence (AI) is the ability of a computer programme or a machine to think and learn'. It combines Big Data and computing power. It is driving the fourth industrial revolution (after steam power, electricity and information technology) and can be used in almost every stage of a company's value creation process. Its main contributions are improved productivity, cost reductions and the human-machine collaboration. Spending in AI (software and hardware) should jump from USD 640 million in 2016 to USD 37 billion by 2025, according to the market research firm Tractica.
Thanks to the ability nowadays to obtain, store and process big amounts of data, it is possible to detect consumers’ preferences and patterns more successfully. Marketing strategies and campaigns are more efficient and can generate higher response rates. Prospects can be better profiled, targeted and engaged. Clients are more satisfied, leading to a higher level of repeat business. We are interested in companies that are specialised in handling massive amounts of data to profile clients.
Cybersecurity and online privacy solutions
Confidence is needed for people to provide their data and then let external parties process these data. But this can only happen when a high level of security is in place throughout the chain from data collection to storing and processing, while ensuring the highest level of privacy. Nobody wants to discover that his/her personal data have become public without consent. Recent episodes of stolen data have resulted in very negative press for companies that suffered widescale data breaches.
Infrastructure, storage, processors and semiconductors
Data processing software and applications require increasingly powerful systems. Good and reliable networks and storage facilities are needed for the exponentially growing amount of data available on the net. Huge databases also necessitate more and more powerful semiconductors to store, process, extract and analyse data sufficiently rapidly.
Rising long-term bond yields would inevitably lead to higher long-term fixed mortgage rates, which would hurt housing affordability. Sharp rises in the unemployment rate during economic recessions have also been traditionally associated with lower demand for new housing, squeezing the capacity to service mortgages.
Health care technology and device stocks performed very well in 2020 alongside the US technology sector; thus any rotation into the value style out of growth may well lead to under-performance of these health care-related technology stocks.