Investment Opportunity? 4 Top Tech Trends and Related Companies to Watch in the Next Decade
Technology is changing the world, fast as the world and the demands of consumers are changing rapidly.
The COVID-19 pandemic has accelerated software and other technology adoption around the globe. And this is likely just the beginning of a multi-year trend.
With this in mind, I will be identifying some investable technology trends and the companies that could benefit for you to research further.
1. Programmatic Advertising
Programmatic advertising is a way to automatically buy digital advertising campaigns across a wide spectrum of publishers rather than from an individual publisher.
Instead of going to a specific vendor to reserve a digital space on their website, advertising real estate is aggregated in ad exchanges where they can be bought or sold.
Programmatic advertising software, in turn, communicates with these ad exchanges to buy and sell these advertising spaces, streamlining and optimising the advertising campaigns for advertisers.
In 2021, a whopping 88 per cent of all digital display advertising in the USA is projected to be transacted via programmatic advertising.
According to Research And Markets, the global market for programmatic advertising platforms is estimated at US$5.2 billion in 2020 and is expected to reach US$33.7 billion in 2027, a nearly 31 per cent compounded annual growth rate.
Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), the parent company of Google, is likely going to be a key beneficiary of this as they dominate the programmatic advertising space with their Adwords platform.
Amazon Inc’s (NASDAQ: AMZN) demand-side platform for advertisers has also gained market share in recent years. But we shouldn’t write off independent specialised programmatic advertising companies such as The Trade Desk (NASDAQ:TTD)
A key advantage that an independent programmatic advertising platform such as Trade Desk has over Google Adwords is that it is truly independent, so it will help ad buyers purchase the best digital ad-spaces the platform can find for the buyers’ needs.
Google Adwords, on the other hand, may have a preference for Google properties, which may not be the best properties for ad buyers on certain occasions.
Whatever the case, with programmatic advertising exploding in popularity, there will likely be room for multiple winners in this space.
2. Solar Energy
Under the Paris Agreement, participant countries have set a goal to limit global warming to an increase of preferably less than 1.5 degrees Celsius compared to pre-industrial levels.
This can only be achieved if more of the electricity the world produces comes from clean sources.
One of the most reliable sources of clean energy will be the sun. Solar power is 100 per cent clean, renewable, and reliable.
As such, governments around the world are creating policies to incentivise greater use of solar energy for homes and for commercial purposes.
Just as importantly for uptake, the cost of solar energy is coming down.
According to the International Renewable Energy Agency, since 2010, the cost of energy production has dropped by 82 per cent for photovoltaic solar and 47 per cent for concentrated solar energy.
Global solar production capacity has also risen from 40GW in 2010 to 580 GW in 2019, suggesting the global demand for solar energy is taking effect.
China continues to lead this space, accounting for 35.4 per cent of the global market in 2018. This is driven by huge government initiatives in China in a bid to accelerate clean energy adoption.
In the USA, with the environment-conscious Democratic party taking the majority of the Senate, political observers expect greater impetus for the US government to support solar power.
Companies such as First Solar (NASDAQ: FSLR), SolarEdge (NASDAQ: SEDG), JinkoSolar (NYSE: JKS), Enphase Energy (NASDAQ: ENPH), and ReneSola (NYSE: SOL) could stand to benefit.
3. Electric Vehicles
In a similar vein to solar energy, electric vehicles are a cleaner alternative to ICE (internal combustion engine) vehicles.
In the past, electric vehicles were slow to gain adoption due to the high cost of batteries and slow charging times.
There were also the concerns of short-range (the distance that can be driven before the vehicle requires charging again) and poor charging infrastructure for electric vehicles due to a lack of charging stations.
But all of this has changed.
The infrastructure in many countries has slowly taken shape while the specifications of electric vehicles are improving at a tremendous pace.
Most prominently, charging times, range, and cost have all improved, leading to greater demand from environmentally conscious consumers.
In addition, governments have stepped in to implement policies to encourage the sales of electric vehicles. California has gone as far as to ban the sale of new gasoline-powered vehicles by 2035.
Global passenger electric vehicle sales jumped from 450,000 in 2015 to 2.1 million in 2019.
But there is still huge room for growth. In 2020, only 2.7 per cent of total vehicle sales were electric. That figure is expected to rise to 10 per cent by 2025. In the next decade, more than 100 million electric vehicles are expected to be sold around the world.
But this is just the beginning. Tesla is ramping up production quickly, breaking ground on new factories in Berlin and Texas. It is also expected to start production of vehicles in its New York factory which used to be solely for solar panels.
On top of that, its Shanghai and Fremont factories are both not producing at full capacity yet. The two existing factories can increase their annual output in the next few years.
Some are projecting Tesla to deliver between 840,000 – 1 million cars in 2021.
With no shortage of demand and no need for advertising (due to incredible consumer mind share), ramping up production will lead to more car sales and more revenue and gross profits for Tesla.
Tesla has also recently taken advantage of its soaring share price to raise new capital.
It raised at least US$10 billion in the second half of 2020 through issuing new shares, and these moves provide the company with ammunition to accelerate its production capacity further.
But Tesla is not the only electric vehicle company in town.
In the USA, legacy automobile manufactures such as General Motors Company (NYSE: GM) and Ford Motor Company (NYSE: F) have been investing in their own electric vehicle models.
Global giants, Toyota (TYO: 7203) and Volkswagen (ETR: VOW3), have also signalled their intent to pivot their business.
Other pure-play electric vehicle startups in China such as Nio (NYSE: NIO), Li Auto (NASDAQ: LI), and Xpeng (NYSE: XPEV) are also jostling for a piece of the pie.
Analysts estimate that there will be 500 different models of electric vehicles globally by 2022.
Whatever the case, multiple winners are set to emerge from this fast-growing space.
4. Conscious Eating
Sticking to the same theme of environmentally conscious consumers, fake meat is becoming the next big trend in conscious eating.
Fake meat refers to either plant-based protein or lab-grown cell-based protein.
In the plant-based space, proteins are extracted and isolated from a plant and then combined with plant-based ingredients to make the product taste and look like meat. Examples of plant-based proteins are Beyond Meat (NASDAQ: BYND) and Impossible Meat.
In lab-grown cell-based meat, an animal cell is extracted from an animal and grown in a lab. This technology is still not yet in mass production as far as I know, but Singapore was the first to approve lab-grown meat for commercial sales.
Although fake meat is clearly better for the environment, consumer take-up has not been rapid due to the high cost of production.
Like electric vehicles, in order for fake meat to truly become mainstream, it needs to reach or exceed cost parity with traditional meat – and it needs to taste good.
Temasek-backed Impossible Foods is on the path to reduce the cost to consumers.
Earlier this year, Impossible Foods announced that it will be lowering prices by around 15 per cent for its open-coded foodservice products, its second price cut since March 2020.
Another key driver of growth is the sale of fake meat in restaurant chains.
McDonald‘s (NYSE: MCD) has decided to debut its own plant-based meat alternative called McPlant in 2021, which Beyond Meat helped to co-create.
According to the research firm, Markets and Markets, the plant-based meat market is estimated to be US$4.3 billion in 2020 and is projected to grow by 14 per cent per year to US$8.3 billion by 2025.
We are indeed living in exciting times.
The world is so dynamic and with new technologies and trends emerging, companies at the forefront of these shifts in demand are primed to reap the rewards.
The Good Investors
This article first appeared on The Good Investors on 17 January 2021 and is part of a content syndication agreement between The Good Investors and Seedly.
The Good Investors is the personal investing blog of two simple guys, Chong Ser Jing and Jeremy Chia, who are passionate about educating Singaporeans about stock market investing.
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