Investing in emerging technologies in 2022
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The unprecedented pace of innovation has resulted in the almost non-stop emergence of new, potentially revolutionary technologies. As new tech firms compete with established companies to disrupt every industry, the trend presents a compelling opportunity for retail investors to get in on the action.
A rise in investments in fintech start-ups, for example, has broadened the number of unicorns – the number of private companies valued in excess of $1 billion – to more than 116 at the end of 2021, according to GlobalData, a data analytics consultancy. Their combined value is about $529 billion, or about 50 percent more than the value of JPMorgan Chase, the largest U.S. bank.
From healthcare to education, the constant development and reimagining of new technology applications have already revolutionized how we live and work. And there’s plenty more to come, according to tech experts.
This handy guide covers some of the emerging technologies that should be on your radar.
The rapid growth of disruptive technologies
- Artificial intelligence (AI) – The AI market could generate sales of $190 billion by 2025, up from $67 billion in 2021, an increase of 184 percent, according to GlobalData estimates. Compound annual growth rate: 38 percent.
- Robotics – The industry could reach $568 billion by 2030, up from $45 billion in 2020, an increase of 1,162 percent, according to GlobalData. Compound annual growth rate: 29 percent.
- Cloud computing – The cloud market could rise to $791 billion by 2028, from $250 billion in 2021, an increase of 216 percent, according to Fortune Business Insights. Compound annual growth rate: 18 percent.
Emerging technologies to consider investing in
Among the most impactful technology advancements are artificial intelligence, robotics and automation, and cloud computing. These top new emerging technologies not only power digital transformation in business, but set the stage for other solutions, including the metaverse, cryptocurrencies, biotechnology, and many others.
Artificial intelligence (AI)
At its core, AI attempts to replicate human intelligence in a computer or machine with faster speed and greater accuracy. Companies such as Alphabet and Apple employ the technology to program machines to solve problems, answer questions, and conduct tasks previously done by humans.
And just like the human brain, the more information AI receives and stores, the greater its potential. For example, the banking industry uses AI to improve decision-making in high-speed trading, automate back-office processes such as risk management, or even reduce costs by using humanoid robots in branches. Similarly, AI powers self-driving cars and even movie recommendations from Netflix.
But how does AI get incrementally smarter? Through processes like machine learning, a sub-field of AI. By combining big data, complex computational models, advanced mathematics, and other methods, machines have the capacity to store and analyze new information at lightning speed. And the more input they receive, the greater the accuracy.
Consider an AI model recently developed at the University of California-Berkeley, which beat a thousand of the world’s best human crossword solvers at the prestigious American Crossword Puzzle Tournament. According to the inventors, the computer program can achieve near-perfect performance on most American-style crossword puzzles. And it can do it exponentially faster than any human.
Like other thematic investing — such as blockchain technology, cybersecurity and genomics — retail investors have access to AI exchange-traded funds (ETFs). For example, the fund Global X Robotics & Artificial Intelligence ETF (BOTZ) holds a basket of companies involved in all phases of AI, from development to implementation.
Projected growth of AI capabilities (millions of dollars)
|Segment||2021 revenue (est.)||2021 growth (%)||2022 revenue (est.)||2022 growth (%)|
Source: Gartner (November 2021)
Robotics and automation
Companies are also turning to robotics and automation to program robots to mimic human tasks, such as driving or even making the perfect latte. These machines can perform jobs independently or with minimal human assistance, streamlining processes and improving efficiencies.
The robotics industry comprises two main areas: industrial robots and service robots. By developing rule-based software and sleek user interfaces, robotics has the potential to disrupt much of the labor market.
Tesla, for example, is developing a human-like robot called Optimus and it could be fully functional sometime in 2022, according to CEO Elon Musk. The robot is 5 feet 8 inches in height and weighs 125 pounds. It can perform jobs that would be tedious or risky for humans.
Musk has labeled the project the “most important product development” for Tesla, highlighting that it could be one possible solution to the United States’ labor shortage. And over time, the billionaire investor believes it could even be even more significant than the company’s vehicle business.
Likewise, companies such as Amazon rely on robotics and automation to improve productivity, reduce costs, build resiliency, and increase worker safety. Autonomous mobile robots could eventually take over most physical tasks, from delivering totes to employees to transporting carts or emptying packages.
In the first quarter of 2022, American companies purchased the most robots ever in a single quarter, spending about $646 million, according to the Association for Advancing Automation. That figure is 43 percent higher than the same period in 2021.
And the trend likely won’t change, according to analysts, who explain that the prolonged shortage in the labor market caused by the pandemic has propelled digital investments across industries.
Retail investors looking to gain exposure to robotics and automation have access to ETFs such as ARK Autonomous Technology & Robotics (ARKQ) and ROBO Global Robotics Automation Index ETF (ROBO).
Cloud computing supports on-demand access to data and information via the internet, providing seamless connectivity and flexibility. Compared to traditional on-premises data storage, organizations have turned to the cloud to scale their digital ambitions, including AI, robotics and automation.
In essence, the cloud provides the foundation for organizations to innovate faster. From achieving greater security to democratizing access to data across the organization, cloud computing continues to gain traction across industries.
For these reasons, companies such as Amazon and Microsoft have aggressively expanded into the cloud market.
Amazon Web Services, the retail giant’s cloud division, has become the dominant cloud-computing platform, generating revenues of $18.4 billion in the first quarter of 2022, up 37 percent. Similarly, Microsoft said that Azure and other cloud revenues grew 46 percent in the last quarter of 2021, following four consecutive quarters of gains at or above 50 percent.
Projected growth of cloud services (millions of dollars)
|Segment||2021 (est.)||2021 growth (%)||2022 (est.)||2022 growth (%)|
|Cloud business process services (BPaaS)||$50,165||8.7||$53,121||5.9|
|Cloud application infrastructure services (PaaS)||$59,451||28.3||$71,525||20.3|
|Cloud application services (SaaS)||$122,633||19.3||$145,377||18.5|
|Cloud management and security services||$16,029||11.9||$18,006||12.3|
|Cloud system infrastructure services (IaaS)||$82,023||38.5||$106,800||30.2|
|Desktop as a service (DaaS)||$2,046||67.7||$2,667||30.4|
Plus, the adoption of cloud computing transcends enterprises, as governments and other institutions around the world embrace the technology to keep up with the pace of innovation.
As companies increasingly move their applications and operations into the cloud, some estimates place the cloud computing business as a $1 trillion opportunity.
For those looking to gain exposure to the cloud market, the Global X Cloud Computing ETF (CLOU) and First Trust Cloud Computing ETF (SKYY) invest in this space.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.