Chapter 5 Invest in disruptive technologies

Year Ahead 2022

8 min read

The trend of technological disruption affords significant opportunity for investors in the decade ahead, and we focus on the three major technologies enabling it: artificial intelligence, big data, and cybersecurity. We expect these “ABC technologies,” along with 5G, to grow faster than the tech sector as a whole. Plugging into these growth drivers will require investors to look beyond just mega-cap tech stocks and focus on mid-cap names that could prove to be “the next big thing.”

The ABCs of technology: AI, big data, cybersecurity

As businesses and governments sharpen their focus on the ABC technologies, we expect the combined revenues of the three segments to grow from USD 386 billion in 2020 to USD 625 billion in 2025. AI revenues should rise the fastest by almost 20% a year, with big data and cybersecurity growing at 8–10% a year, but with greater potential for margin expansion. Overall, we expect companies exposed to our “ABCs of tech” theme to deliver 16% earnings per share growth per year.

Strong growth expected for the ABCs of tech

Addressable market (USD bn, lhs) and projected growth rate (CAGR %, rhs)

…and 5G

We believe the rollout of 5G technology, which is 20 times faster and 90% lower in latency than 4G, will bolster the impact of the ABC technologies, enabling various applications that were not feasible before. These include fixed wireless access, autonomous driving, immersive augmented and virtual reality, telesurgery, massive Industrial Internet of Things, data-driven agritech, and highly connected smart cities.

We see opportunity in 5G enablers and platform beneficiaries, and estimate a mid-teens earnings growth potential over three years.

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