Top themes spotlight: Technological change makers

Enabling technologies leading the way

Close your eyes and envision the world 10 years from now. What do you see? Some of the first images that come to mind may include driverless cars, robots, and drones. Yet, these technologies are mere applications and embodiments of a set of five powerful technologies that are invisibly disrupting nearly every sector of the economy. These so-called "enabling" technologies include: artificial intelligence, augmented reality/virtual reality, big data, cloud computing, and 5G. Today, these technologies, combined, represent about a mid-teens share of overall global IT spending. We expect the amount of dollars devoted to them to rise from USD 420bn last year to 1.1trn in 2025, which equates to a 12.8% average annual growth rate over that time horizon. Technological advance, changing consumer lifestyles, and the need for enterprise productivity will support demand for these enabling technologies, which will give way to a vast array of previously out-of-reach applications.

We expect the amount of dollars devoted to enabling technologies to rise from USD 420bn last year to 1.1trn in 2025


The rise of e-Commerce and a thirst for connectivity

Technological advances have the power to dislocate markets in a short time span. The proliferation of e-commerce and the share shifts to online from brick-and-mortar retail is a well-known example. However, despite its seemingly meteoric rise, e-commerce penetration has just crossed 10% in a few markets, meaning that the potential for growth has not been completely usurped by dominant players. As a result, we expect major technology companies to continue to focus on investing in the enabling technologies powering e-commerce, while at the same time, traditional retailers will invest in building out their online channels. This line of reasoning applies to several other disruptive trends, such as fintech and automation, where we expect investments in enabling technologies from both tech disruptors, as well as incumbents who fear to be left behind.

The second trend driving demand for enabling technologies is consumers' constant thirst for connectivity. While the Millennials may have been at the forefront of the shift to digital lifestyles, the need to be plugged-in and able to multitask has infiltrated other generations as well. In an average week, two billion messages are exchanged between businesses and customers on Facebook Messenger (big data), according to Facebook; 14 billion minutes of video and voice calls take place on Whatsapp (eventually will use 5G), according to Facebook; 800,000 smart speakers (AI) are shipped in the US, and 500 million users visit app stores (cloud), according to Apple; and 200,000 virtual reality devices are sold, according to IDC and Bloomberg Intelligence.

Technological advances have the power to dislocate markets in a short time span


A shift in enterprise spending

Finally, technology has boosted economic growth via productivity improvements (personal computers, office automation, etc.) in a low-growth environment, and the need to raise productivity further has only increased. As a result, an incremental shift is occurring in the nature of enterprise spending away from merely maintaining legacy technologies to introducing emerging technologies, with cloud, big data and AI as the key beneficiaries. Thanks to the disruptive nature of many of these enabling technologies, we see significant economic value being added globally over the next few years through efficiency gains. For example, an AI-powered chatbot can help both a bank and a tech disruptor to improve their fintech offering, while AR/VR can aid a retailer and a tech company in bettering their e-commerce offerings.

Looking forward, we see enabling technologies as one of the best ways to invest in technological advances. Investors likely will be best rewarded by taking diversified exposure to companies involved in enabling technologies. Software and semiconductor companies with superior pricing power and high entry barriers should fare particularly well, in our view.

We see enabling technologies as one of the best ways to invest in technological advances

Laura Kane CFA, CPA

Head of Investment Themes Americas
Global Wealth Management
Chief Investment Office

Kevin Dennean, CFA

Technology and Telecom Equity Sector Strategist Americas
Global Wealth Management
Chief Investment Office


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