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This article first appeared in Portfolio Adviser on 20 February 2024 Health and money are two fla...
Apple held its annual autumn launch event in September, debuting a host of new products. All eyes were on the new iPhone 13, with its upgraded camera, built in 5G and reactive refresh rate for better battery consumption. The new Apple Watch Series 7, iPad mini and iPad were also featured.
The very first iPhone was announced in January 2007 and, while it wasn’t the first mobile phone, or even smartphone, it effectively leapfrogged far beyond the competition. Apple made technology – and the internet – portable and personal. It started a revolution. At the start of the 2000, there were around 740 million mobile phone subscriptions worldwide*. Today, that number has surpassed 8 billion*, meaning there are now more mobile phones on the planet than people.
The iPhone not only accelerated the trend, but it transformed how we use technology in our everyday lives. It put cameras into our hands, along with media, resources and apps. It even opened up new business opportunities like Uber. I can’t help but wonder what other areas of life technology will transform in the next 20 years.
“We’re changing the world with technology” — Bill Gates
Alexander Darwell, manager of European Opportunities Trust, has been investing in technology since the Dotcom era and the sector represents a significant weighting in the trust. He told me “one of my investments at the time in computer design software has continued to attract more customers from new industries and geographies and has grown to become a top five investment in the trust. However, distinguishing real growth from ‘bubble growth’ continues to be as pertinent today as it was then.”
Whether or not there’s a tech bubble in 2021 has been a topic of debate. Facebook, Amazon, Apple, Microsoft and Alphabet (Google’s parent company) account for almost 15%** of the MSCI World Index and have all experienced extremely strong share price growth in recent years. But the worry now is that they have become so large and benefited from lockdown so much that earnings could start to look somewhat disappointing.
The team behind Baillie Gifford Global Discovery believes it’s only the start of new technology. “Emerging from the pandemic we’re hopeful of a new, more intense phase of technical innovation and progress,” they said. “The convergence of new technologies, such as artificial intelligence, cloud computing and robotics, combined with cost reductions of key hardware components, such as lithium-ion batteries and transistors, mean we could be entering a new technology super-cycle of innovation.”
The Sanlam Artificial Intelligence fund targets companies whose business models are aligned to benefit from this growing theme. Alongside a differentiated approach to looking at stocks, whereby the managers look for companies that incorporate AI, rather than just making it, means this fund is a more diversified play on a theme growing in popularity.
Stephen Yiu, manager of LF Blue Whale Growth, told me about Nvidia who he believes is accelerating the evolution of artificial intelligence, with silicon chips that power the next phase of computing. As Stephen points out, “you may not have heard of Nvidia but chances are, you’re already a regular user of one of the many services their silicon chips enable, including video recommendations on TikTok, grammar checks in Word online, and augmented-reality shopping experiences on Facebook.”
Matthew Page, co-manager of Guinness Global Innovators, also believes that Nvidia, a company they’ve held for over decade, is “a key enabler of many transformative technologies.” The company is the leading producer of high-end graphic processing units (GPUs), and one of the world’s most valuable semiconductor companies. “GPUs have since found an abundance of new applications in everything from cloud computing to artificial intelligence and autonomous vehicles,” he said.
Artificial intelligence and cloud computing were a popular theme for the managers I spoke to about the future of technology, but one of the most interesting innovations came from Guy Feld, co-manager of Marlborough UK Micro-Cap Growth fund, when he was discussing water conservation.
With more than 3 billion people effected by water shortages, Guy told me how technology will play a key role by “reducing pollution and managing wastewater more efficiently, which will be vital in tackling this challenge. Innovative companies we hold in our stable of funds are making very interesting advances to help reduce water use and pollution across the board from large industrial facilities to domestic washing machines. Technological innovation in this field has the potential to help transform the lives of millions of people whose lives are currently blighted by water shortages.”
One thing I know for sure about technology is it’s always moving, and finding the next Apple isn’t as easy as it sounds. But, as the managers of Baillie Gifford Global Discovery reminded me “this technology super-cycle will have myriad and profound impacts on peoples’ lives – improving connectivity, automating tasks so people can complete more value-add activities, and allowing us to further unlock nature’s secrets.”
*Source: Statista, number of mobile subscriptions worldwide, Jan 2020
**Source: MSCI World Index, 31 Aug 2021