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The old adage, “Every cloud has a silver lining”, has never been more appropriate. Although the pandemic has caused devastation around the world, it has also served as a catalyst within the global technology industry. Technology is revolutionising communications, commerce and lifestyles at breakneck speed.  Think of the Mark Zuckerberg’s 3D internet the ‘Metaverse’ and his vision for virtual socialising and the explosion in NFTs (non-fungible tokens), AI (artificial intelligence) and the Internet of Things (IoT).

Disruptive technologies (DTEC)
Even if the Metaverse and Avatars seem irrelevant to everyday life, you don’t have to look far to see how disruptive technologies have had the power to influence how we live, shop and conduct business. For example, back in the day, the Analog TV would have been considered a disruptive technology and similarly today we all shop online, use GPS, newsfeeds and are embracing electric vehicles.

Contrary to popular belief, disruptive technology isn’t necessary new, as its name suggests it is technology that has the potential to revolutionise and disrupt current markets and value networks. It can be used across all fields, from healthcare to the automotive industry.  Initially, it is often viewed as high risk, but over time it matures and enters the mainstream. As a result, industries are often transformed due to faster and more affordable production methods.

Driving factors
According to Abingdon’s financial management analysts, disruptive technologies were already taking hold prior to the pandemic. In 2021, there was a wholesale adoption by businesses and the general public. This shift came about due to growth in the IoT (facilitated by the launch of the 5G network), blockchain tech and of course Covid, which forced the world online.

What does this mean for investors?
There are two side to this coin, firstly investment managers need to be on top of emerging technology developments in order to identify long-term investment opportunities that will offer sustainable returns.  Secondly, to assess whether companies already owned could be adversely affected by the increasing prevalence of disruptive technologies across the board.

An article by Nasdaq.com states that disruptive technology allows investors to take advantage of companies entering traditional markets, but with new digital production and distribution methods. And that these companies are likely to disrupt existing markets and value networks.

AFR.com’s article, “14 disruptive trends you need to know about in 2022”, highlights the importance of investing in stocks of the companies that sell the tools required to build growth.  In disruptive technology terms, this means owning the companies such as data analysis, cloud services and components that power computers.   

Risk / Rewards
As innovation happens there will be risk and rewards. New technology is affecting all aspects of ecommerce, banking and collectables. However, there isn’t enough data in this fast-moving market to predict the winning trends. Therefore, diversification and using investment managers who are tuned-in to the latest tech disruption trends and stock valuations are crucial. At this point in time, risks can be minimised by betting on the established technology giants such as Microsoft.

Here are best 10 tech investment fields to watch out for in 2022 as published by GlobaData’s TMT Predictions report:

The Metaverse (real time virtual world scenarios)
According to Bloomberg Intelligence, the global metaverse could attract over $800bn of investment by 2024. Meta (formerly Facebook) had committed to investing $10bn in 2021 alone.

AI (artificial intelligence including machine learning, conversation platforms, data science)
The AI market will be worth $190bn by 2025. Implementation is being led by healthcare, tech and banking sectors.

Fintech
GlobalData identified 116 Fintech Unicorns with a combined value of $529bn, with 10 addition Unicorns to be created by 2024.

Cloud computing
Cybersecurity investments are expected to rise, particularly with the increase in remote workers and greater investment in disaster recovery services. The market is forecast to be worth $161bn in 2022.

Cloud gaming (direct streamed video games)
The market is predicted to see a 59% year on year rise, equating to market revenues of $3bn in 2022. The technology is snapping at the heels of the video games market worth over $221bn.

Cryptocurrency
Although volatile, cryptocurrency is fast becoming accepted in the mainstream and has the potential to disrupt traditional financial systems. There are currently over 14,000 versions and the market is worth $3trn.

Electric vehicles and batteries
It is predicted that by 2025 there will be over 10mn electric vehicles in production. The growth in this sector is driven by ESG concerns. However, there could be issues with battery production due to demand and supply of Lithium.

5G Network (greater connectivity)
Adoption of 5G will be led by APAC and North America in 2022. The US market is predicted to increase by 115% by 2025.

Quantum computing
According to GlobalData, quantum computing will overtake today’s computers 2027, providing phenomenal power and accuracy.  

Automation and robots (industrial and service)
The robotics industry is predicted to see a $45bn rise between 2020 and 2030,  There will be increased automation in factories and service robots in healthcare, the home and logistics.

If you would like more information about disruptive technology investments, contact Abingdon Global Investments at [email protected].