Advanced technologies are leading to dramatic changes in the global economy and are creating a multitude of opportunities for investors.
Technological innovation is not only resulting in new products and services but is also lowering costs and improving the functionality of existing products and services. This coupled with a strong demographic tailwind is the reason why technology is reshaping the operating model and taking an ever-increasing share. Tech disruption is accelerating, propelled by a powerful convergence of technology trends, with increasingly accessible consumers through online and mobile.
Businesses, governments and consumers are increasingly spending more on technology to improve quality, productivity and profitability and efficiency. Moore’s Law predicts that the number of transistors that can fit onto a chip will roughly double every two years, therefore decreasing the relative cost and increasing performance. As the price falls and capability of technology increases, this is spurring more tech innovation and consumption – highlighting the investment potential of the global technology sector. Powerful secular themes are accelerating the technological revolution. Half of the planet is now online, accessible and able to make digital payments. Digital natives - younger demographics that grew up with the internet and apps are demanding a more frictionless user experience, are accelerating tech adoption.
Cloud infrastructure and artificial intelligence (AI) leverage these important foundations. The cloud democratises technology by collapsing the cost of computing and enabling access to cloud services anywhere, at any time and at very low cost. AI has also reached an inflection point. The rapid deflation of computing power allows for deep learning and neural networks on a scale that was impossible only a few years ago. The cost of the analysis of data is declining dramatically.
These technologies are rapidly evolving into commercial products because they can be disseminated faster than ever before given the groundwork laid by global internet penetration, the cloud and payment digitisation. This creates a virtuous circle for technology companies that can monetise new technologies quicker, and for profits to be reinvested in rapidly evolving innovation.
Artificial intelligence - more than a theme
Source: *Citi Research, as at 30 December 2016, **IBM, as at 2015.