The evolution of technology has certainly garnered the interest of the general public and investors alike curious about what is technology investing , making it an attractive and exciting field to keep an eye on now and in the future.
Overall, the sector has come a long way in the last two decades: in March 2000, the S&P 500 technology index hit its peak of 988.49 points, a significant increase from 200 in 1996 leading to the dotcom bubble but the sector quickly tumbled thanks to various flops.
Eighteen years later, the S&P 500 IT index has hit 1,275.70 on July 13, surpassing its peak in 2000 with its 10-year returns at 13.68 percent.
Back in 2000, when the NASDAQ was at its first all-time high at a milestone 5000 points, several tech sites tried to cash in on the opportunity, including pets.com, but most of the companies folded out and thus emerged dotcom flops in the era of dotcom bubble.
With so much growth in the tech sector over the last two decades, interest in the industry has never been hotter.
Here at Investing News Network (INN) breaks down the answers to the question of, “what is technology investing?” and why investors should be interested.
What is technology investing? Evolution of tech
Adobe through its ‘2018 Technology and the Reinvention’ report surveyed people on the evolution of technology with the results suggesting that mobile and smartphones are the most important innovation of technology.
Other notable innovations that people seem to have found to be impactful arewidespread availability of email, cloud computing, wifi and broadband.
The report also highlighted the professional life innovations that people took advantage of with file/sharing and collaboration topping the list, followed by emails, team communication, online meeting and screen sharing and voice conference.
The past decade or so has also seen the evolution of the music industry, which has gone from vinyl to streaming with the most notable of them being Spotify (NYSE:SPOT) which made its debut on the NYSE in 2018. There has also been the emergence of video streaming with the likes of Netflix (NASDAQ:NFLX) expanding to 190 countries around the world.
The other segment of tech that witnessed growth over the last 10 years is messaging apps, connecting people to various countries around the world.
Speaking of connectivity and the future, the fourth industrial revolution has been tied to various sectors of technology from artificial intelligence (AI) to 3D printing and countries like India are banking on data and Industry 4.0 to aid its growth.
Another vertical of technology that is in demand is the blockchain with the global market size set to grow from US$ 708 million in 2017 to US$ 60.7 billion in 2024. A key pillar of digital economy, blockchain’s importance has grown in the recent times.
“As the banks and finance industry move into the modern age of real time transaction processing, blockchain is a core enabling technology,” said a MarketreportsCenter Report. “This market segment previously has been held back in part by the outdated aspects of the mainframe computing technology. Blockchain is spurred by more modern ways to manage global transactions across national borders from IBM, Microsoft, and Accenture.”
What is technology investing? Market growth
The spending by companies into the sector is, indeed, significant. According to report from Appito, the global technology economy is now the world’s third largest economy surpassed only by United States and China.
The report states that technology spending worldwide has hit more than US$ 6.3 trillion in 2016 while the gross domestic product (GDP) of United States was US$ 18.57 trillion and China was at US$ 11.20 trillion.
It was also noted that IT spending is 28 percent bigger than the GDP of Japan and almost two times of Germany.
What is technology investing? Future outlook
If one thing we have learnt in the last three decades, it is the fact that technology is always evolving to new territories thus aiding both the general public as well as investors.
While global spending on information technology (IT) is set to grow from US$ 673.6 billion in 2017 to US$ 733.9 billion by 2020, numerous other verticals of technology are now set to outpace the IT sector.
Case in point being the Internet of Things (IoT), which is projected to grow from US$ 674 billion in 2017 to US$ 1 trillion by 2020. The report from IDC further states that the Internet of Things is set to witness a compound annual growth rate (CAGR) of 14.4 percent through 2021, reaching US$ 1.1 trillion market size.
The evolution of artificial intelligence (AI) is also something investors should watch out for , which is now progressing towards ‘General AI’ from the ‘Narrow AI’ which has been in play for the last two decades. The General AI in concept is the machine that has all the human senses and does things just like humans.
PwC in its technology outlook has predicted eight verticals which the firm thinks would disrupt business with the list includes AI, augmented reality/virtual reality, blockchain, drones, IoT, robots, 3D printing and autonomous vehicles.
Each of these verticals is set to see a massive return in revenue, with AI hitting US$ 60 billion by 2025, up from US$ 1.37 billion in 2016.
There’s a mixed verdict on virtual reality with one report predicting it to reach $ 162 billion in 2020 while the other indicating that the market would reach US$ 26.89 billion by 2022.
While most have tipped 3D printing as the fourth industrial revolution, it is set to see the lowest growth compared to others mentioned above with the market set to touch US$ 20 billion by 2021,up from US$ 12 billion in 2018.
What is technology investing? Ways to invest
With such a huge potential in technology and with the sector being the third largest in terms economy, there are number of ways investors can still step into the sector including:
ETFs:
For those who are new to investing and would rather invest in a market rather than a specific company, ETFs are a popular way to do so.
Here’s a brief overview of few technology ETFs for investor consideration.
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- iShares US Technology ETF (NYSEARCA:IYW): The fund came into inception on November 12, 2001 and currently has 123 holdings covers all the big names of technology including Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOGL).
- Technology Select Sector SPDR (NYSEARCA:XLK): The net assets of this fund is one of the largest in the sector at US$ 22.12 billion. There are 76 holdings in this fund and it came into inception on December 16, 1998. Just like iShares, this fund has all the major names in the industry including Visa (NYSE:V), Intel (NASDAQ:INTC) and AT&T (NYSE:T) along with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOGL)
- iShares Global Tech ETF (NYSEARCA:IXN): Unlike the other iShare ETF, this fund focuses on technology companies from around the world. Funded in 2001, the exposure of this fund ranges from United States to Japan although US gets the majority of the exposure.
Stocks:
For investors looking to put money into a company, there are a number of options including the large cap technology stocks, 3D printing companies artificial intelligence, robotics, virtual reality and blockchain stocks
Don’t forget to follow us @INN_Technology for real-time news updates!
Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.
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