The world of technology has been abuzz in recent months with the unveiling of OpenAI’s* ground-breaking text-to-video generative AI (artificial intelligence) tool Sora and the launch of Apple’s Vision Pro goggles. While Sora is reportedly able to generate sophisticated videos from text prompts, the Vision Pro is a digital gateway to immersive experiences that could change everything from how we watch movies to how we learn and work together.
These innovations are not just cool tech, but signal the acceleration of a shift towards a world rich with AI and metaverse solutions, opening up new horizons for creativity, productivity and investment opportunities.
For instance, generative AI is able to manipulate massive data sets to generate outputs which are beyond the capability of humans. As such, its potential to disrupt a wide range of industries is huge. It will also drive new applications across sectors as diverse as automotives, healthcare and finance.
“While ongoing macroeconomic and geopolitical challenges continue to be of concern to investors, the growth potential of companies exposed to key technology themes remain intact,” says Mr Chris Iggo, chair of the AXA Investment Managers (AXA IM) Investment Institute and chief investment officer of AXA IM Core.
Ripe for rapid growth
According to AXA IM, this technological leap is poised to disrupt industries across the business landscape, from automotive to healthcare and finance, promising a future where AI-driven applications become increasingly commonplace.
“AI serves as the driving force which we expect to unlock unprecedented opportunities for companies, consumers and investors, and which we view as playing a crucial role in converting creative concepts into highly realistic and immersive content and experiences,” says Mr Iggo.
“While the focus has been mainly on infrastructure – cloud computing, computing capacity and semiconductors – a plethora of sectors stand to benefit,” he adds.
McKinsey forecasts generative AI to add trillions to the global economy as the technology takes over more manual tasks from human workers – its consultants predict that current generative AI and other technologies could potentially automate work activities that take up 60 to 70 per cent of employees’ time today.
Furthermore, as AI makes its presence felt in multiple industries, numerous sectors across the tech spectrum are poised for potentially significant growth. The metaverse, for instance, driven by rapidly advancing AI technology, is expected to generate up to US$5 trillion (S$6.7 trillion) in value by 2030 – roughly the size of Japan’s economy.
The metaverse’s potential extends beyond just gaming and towards something more fundamental, as it reshapes the way we live, work and play. Already, companies are leveraging the metaverse in a growing range of applications, from product development to environmental simulations.
As more companies pursue automation, investments in advanced robotics driven by AI are also expected to pick up. According to AXA IM, robotics is increasingly being recognised as a viable investment and potentially superior growth area of the market. Among benefits, automation can help increase efficiency and lower costs, improve reliability and perform highly sophisticated and delicate tasks.
Against this backdrop of rapid innovation, the investment firm believes that there are numerous potential long-term growth opportunities for tech stocks.
A positive macroenvironment
The anticipated easing of inflation will further support the prospect for equities, particularly in the tech sector. After peaking in June 2022, inflation has come down meaningfully, raising hopes that the US Federal Reserve is done with hiking interest rates.
Furthermore, the return of e-commerce following a post-pandemic slump is helping boost prospects in the digital economy. According to AXA IM, e-commerce penetration levels have now normalised and it anticipates a return to better growth in the future.
The forecasted surge in IT spending by research and consulting firm Gartner reflects the increasing reliance on emerging technologies in areas such as AI, metaverse and robotics, driving demand for semiconductors, cloud computing and cybersecurity solutions. Gartner expects spending on technology to grow by 7 per cent in 2024, up from 4.8 per cent in the previous year.
Government initiatives across major economies will further bolster the technology sector. While Asia maintains its lead in the adoption of industrial robotics, major economies are poised to increase investments in 2024. In the US, the government has passed landmark legislation aimed at enhancing domestic technology capabilities.
AXA IM is of the view that given the current trends in the tech sector as mentioned above, investors have numerous opportunities to tap into the growth potential of companies leveraging emerging technologies.
*Any mention of companies and/or their products are for illustrative purposes only, and do not constitute as investment advice or recommendations.
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