The 3 Most Investable Technology Megatrends of 2018
As the calendar flips to January, the only thing outnumbering New Year’s resolutions will be everyone’s predictions about the future. And nowhere is the prediction mania more pronounced than in the technology sector.
From mainstream sources like CNN to the geeks-only EDN Network, everyone is cranking out his or her list of the top technologies for 2018.
I’m dusting off my crystal ball and jumping into the mix, too. But I’m throwing convention out the window.
Forget about just sharing the next big trends (the newest and coolest technologies being developed). I’m sharing the next big investable trends.
Why? Because “new and cool” seldom translate into profits. Such overhyped technologies tend to get stuck in the lab for years before finding their way into commercial applications. In turn, so do the profits.
Like you, I’m an investor first and a technophile second. So I like my technology trends served profit side up. Stat! Hence our laser-sharp focus here on only investable trends, not simply cool ones.
The trick to unlocking maximum profitability, of course, is to pinpoint the most investable technologies early. We’ve done that already with the three trends revealed below.
In some form or fashion, our subscribers have already had the chance to profit from each of these trends.
Rest assured, the gains are just getting started, as all three trends promise to persist for years to come.
Don’t let the staying power fool you into thinking there’s no need for urgency here, though. I’m predicting that 2018 will be a breakout and banner year for all three megatrends.
So consider this your last reminder to get a head start on the rest of the investing world before it’s too late.
Tech Mega Trend #1 — Rise of the Machines: The Biggest Tech Revolution of the 21st Century
The Age of Robotics is upon us! Or as Boston Consulting Group (BCG) notes, “The mega-trend toward mobile, autonomous, multipurpose and bespoke robotics is gaining traction much more quickly than most corporate executives realize.” In 2016, venture capital firms poured $1.95 billion into robotics-related startups — up a staggering 50% from the prior year. More staggering still, over the next decade, worldwide spending on robotics is set to more than double from $26.9 billion to $66.9 billion.
Tech Mega Trend #2 — The Meteoric Rise of Electric Cars
Global electric vehicle (EV) sales currently account for less than 1% of total sales. But within 15 years, Morgan Stanley analysts predict that EV sales could eclipse gas-powered cars. We’re talking about a massive paradigm shift and sales ramp-up on the immediate horizon. In fact, the lithium market is telegraphing precisely what’s coming. And it’s the commodity itself that should pique our investment interest.
Tech Mega Trend #3 — Cybersecurity: The Undisputed “Trade of the Decade”
Without adequate cybersecurity, our world is doomed. Think about it: Already, close to 90% of business assets are digital. And with the billions upon billions of dollars pouring into the Internet of Things (IoT), everything is eventually going to be connected to the internet — and, therefore, vulnerable to attack. Power grids, banks, hospitals, cars, airplanes, communication networks — nothing will ever be completely, 100% secure.
Even our own government gets it, pegging cybersecurity as “one of the most serious economic and national security challenges we face as a nation.” Ever. Here’s the rather massive problem, though: As the Digital Age has unfolded — and the need for adequate protection has obviously increased — the world has criminally and tragically underinvested in cybersecurity.
And of course, the threat environment has steadily increased at the same time.
Case in point: Worldwide cybersecurity spending totaled less than one-tenth of 1% of global gross domestic product (GDP) last year. In comparison, military spending as a percentage of GDP has routinely averaged close to 3–4% per year.
Yet cyberattacks are soaring by as much as 40% annually.
Clearly, we’re dealing with unprecedented and obvious neglect. As such, it represents an unprecedented investment opportunity. Not surprisingly, cybersecurity spending has been one of the fastest-growing areas of technology over the past few years.
The total spending is set to eclipse $100 billion this year and continue growing by at an annual clip of about 10%. That’s more than twice the growth rate of overall IT spending and IT services.
But here’s the sobering reality: We’re not even spending enough to catch up with the problem, let alone get ahead of it. And we’ll never be able to, either.
The growing amount of data being stored across multiple locations means the amount of digital assets that need to be protected keeps expanding. In fact, our “always on” society creates an astonishing 2.5 quintillion (one followed by 18 zeros) bytes of new data every day.
It can be hard to picture the enormity of this expansion when we’re thinking in such digital terms. To help, though, try thinking about each byte of data as a landmass. The more bytes we produce, the larger the overall landmass gets. And every inch of it needs to be defended against attack.
Long story short — the cyberattack “surface area” is growing at a dizzying pace. Cybersecurity provider Proofpoint Inc. (PFPT) estimates that it will surge a staggering 44-fold over the next 10 years.
No wonder cybersecurity is the No. 1 priority of CIOs in nearly every industry survey conducted by Morgan Stanley analysts in recent years.
If cybersecurity spending increased at the same rate as data expansion, we’d be talking about a $2.6 trillion industry. Yet even the most bullish estimates only call for spending to hit $200 billion by 2020.
As one industry insider confessed, “We can’t hire our way out of the problem. There aren’t enough resources and the cost is too high.”
Add it all up, and the stage is set for cybersecurity budgets to explode as every company, agency and government tries to beef up their defenses to avoid being a victim — or worse — the enabler of a national tragedy because of inadequate safeguards.
I estimate that the top security vendors should easily be able to sustain 25% revenue growth over the next five years. By comparison, the average S&P 500 company is only increasing sales by about 5%.
Against such a backdrop, I can’t envision a more compelling opportunity. In fact, this is quite possibly the trade of the decade. Don’t miss out!
Ahead of the tape,
Chief Investment Strategist, Wall Street Daily