Game-changing technologies are creating secular growth opportunities and reshaping the investment landscape. They’re transforming society, profoundly changing the way people around the globe live their lives and giving rise to new companies that are challenging a multitude of tradition-bound industries.
Mobile Internet, e-commerce, and video streaming are some of the technologies that have significantly influenced how people communicate, shop, and enjoy their leisure time. And companies like Amazon, Tesla, and Netflix are some of the upstart companies putting pressure on competitors who have been in business for decades.
The pace of innovation likely will accelerate, with artificial intelligence, big data, and DNA sequencing potentially serving as the next disruptors. PGIM Investments offers perspective on some industries experiencing seismic changes caused by this disruption and on new trends we can expect to see in the years ahead:
Electric cars are competing fiercely with combustion engine vehicles and will continue to be in demand as prices drop. Camera-based computer vision, machine learning, advanced driver assistance systems and autonomous driving technologies are profoundly changing the way we drive. Additionally, ride sharing, led by internet based application companies Uber and Lyft, is reducing the need for automobiles in urban areas, which could eventually lead to a reduction in auto demand over the long term.
Technological innovation and internet platforms continue to drive commerce away from traditional brick-and-mortar retail to the internet. E-commerce is growing at 15% annually versus minimal growth for traditional retail.
Mobile payment is another technology that is scaling rapidly today and should be a large growth driver in the future. Right now, most of the growth is occurring outside of the U.S., primarily in emerging markets. In China, the banking system is not well established, which provides an opportunity for internet companies. In 2016, for example, Chinese payment firms processed $5.5 trillion in mobile payments1 and it’s been increasing at a very rapid pace.
The cost to sequence a human genome has dropped from almost $10 million in 2008 to about $1,000 today. This trend has led to an innovation cycle in which pharmaceutical companies are identifying gene functions and developing drugs that can precisely target underlying disease mechanisms.
Companies driving change
Industry disruptors are expected to be a source of high growth over the long term, even in a slow-growth world. Many of these companies are innovative leaders with network effects that create economies of scale leading to significant competitive barriers that foster the sustainability of their growth.
Capitalise on emerging trends and technologies
Successfully investing in innovative technologies and companies requires a deep understanding into how the technologies will drive a company’s fundamentals and equity performance. Experienced investment professionals able to recognise structural shifts in the marketplace and identify and gauge the duration and magnitude of growth, revenue optionality, and competitive advantages are critical to investment success. Observing consumer-buying patterns, new addressable market opportunities, digital disruption, and scientific breakthroughs can create significant opportunities for investors.
Please join Mark B. Baribeau, Managing Director, Head of Global Equity and Portfolio Manager for Jennison Associates, as he provides his investment perspective on these game changing technologies during the Fund Buyer Solutions Stream on 12 June 2018 at 11:10.
1 “China mobile payments dwarf those in US as fintech booms, research shows,” Financial Times, February 2017
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