Innovative markets outlook: investing in new technologies
Innovative stocks can provide hefty profits but they come with certain risk
It is expected that the markets created by new technologies can reach hundreds of billions of pounds or more globally. For instance, experts estimate that only the market for robotics technology can be worth more than £160 billion worldwide by 2025 and keep in mind that this is only one piece of the innovative markets.
So, what are the new technologies to invest in? Some of the widely quoted disruptive ones today are: robotics technology, artificial intelligence, blockchain and green technology.
The widespread adoption of robotics technology in our everyday lives means that the industry has substantial growth potential. Robots are already being used in production processes, the healthcare industry and in different stages in logistics. The advances made in robotic technology expands the usability of robots for more advanced tasks that were usually performed by humans.
Artificial intelligence (AI) is one of the most popular topics in the last couple of years, and it falls under computer science with a focus on the development of intelligent machines that will be able to perform human alike functions. Because of the wide application of artificial intelligence, there are many well-known names in the battle to develop advanced artificial intelligence. Companies such as Volkswagen, Google, Apple, as well as financial companies, are among the leading ones in this area. Moreover, AI technology is applicable in the driverless cars industry, customer service, financial services, data analysis, data processing, etc.
The potential of AI technology is also noticed by the UK Government which is evident from its participation in the £1.11 billion ($1.4bn) fund aimed at researching AI applications and AI related products and services. However, be careful when investing in AI stocks, as this technology is not simple to understand.
Experts expect that the industry could become worth a hundreds of billions in the following decade. Because AI technology is used across different industries, select a specific area before investing in AI stocks.
Blockchain technology has enjoyed increased application during the last decade and it is mostly known as the technology behind Bitcoin, Ether and other cryptocurrencies. It is preferred for record-keeping activities because it provides transparency, eliminates redundancy and promotes security. Because of that the blockchain technology is applied in different industries such as financial services, logistics, healthcare, cross-border payments, smart appliances. In addition, governments also eyeballed the blockchain as a decentralised system through which they could record their data.
Green technology is also one of the new technologies to invest in. There are numerous companies oriented toward the production of renewable energy and its complementary products. One of the technologies in this category is the one behind the batteries used in electric vehicles. It has experienced significant improvements in terms of its production costs and quality. Nowadays, the batteries installed in electric cars, bikes, and other products are cheaper, which has decreased the price and increased the availability of this type of product. Just remember how expensive it was to buy an electric car a couple of years ago. The new technology will enable the creation of companies that will enter the green vehicles that companies can be placed on our watch list.
For instance, who knew that stocks could be such a profitable opportunity a few years ago. Tesla ended 2012 with a stock price of around £27 ($34) while in 2020, Tesla stock price has jumped up to £443 ($558). That is an increase of more than 1,500 per cent in 7 years.
Innovative stocks and technology stocks represent companies that have the potential to offer higher returns for the investors, but these stocks may come at higher risk since new technology is involved. Generally speaking, nobody knows for sure whether the innovations will be a success or failure. Nonetheless, there are some technologies that are already becoming widely accepted and significantly affecting existing industries.
The attractiveness of innovative stocks is that investors still have the opportunity to buy some of these stocks at a rather low price because they are still in their infant stage or early development stage.
Innovative companies to invest in
Innovative companies can be considered to be a nice addition for your long-term investment strategy because they have the potential to experience substantial growth, as long as they manage to survive.
Some of the popular tech companies to invest in the UK are Ocado Group with its activities in the online grocery market, and Blue Prism Group which combines robotic process automation and artificial intelligence. In the finance sector, this includes Monzo, which is a digital banking platform, and TransferWise in the money transfer industry. These innovative stocks are only a fraction of the tech companies that can be found in the UK.
Innovative stocks can be a lucrative investment, which is evident from the increase in Ocado Group stock price. At the end of 2015, the stock price of Ocado Group was approximately £300 while in the first month of 2020 it reached a price of around £1,330, so you can see how much investors earned from this stock after five years. You can also look at the evergreen tech stocks such as Google, Microsoft or Adobe.
Google stock has continued to rise during the last three years, hitting a multi-year high in the first half of February 2020. The price was around £680 ($855) in March 2017 and it increased to slightly above £1,200 ($1,520) before the coronavirus outbreak. The charts of some other tech companies more or less show the same price movement and this is an indicator of how much the value of these companies has increased in the last few years. Thus, investors' decisions in which innovative companies to invest is not an easy one.
AI stocks to invest in
Shares of companies dealing with some area of artificial intelligence can also open up new profitable opportunities for investors. Before investing in AI stocks try figuring out whether you want to invest in a well known company entering the AI market or including the AI in its operations – or if you prefer to invest in emerging AI businesses.
If you decide to invest in an established company then don't get confused if you see companies such as Amazon, Google, Microsoft or Facebook in this list as they have entered the AI technology market as they have a vast amount of data that can be explored.
As was the case with Google stock, the same situation occurred with the price movement of Amazon stock. Since 2016 the stock price has continuously risen until February 2020 and the price more than tripled during the period.
Investing in AI start-ups can provide even more profitable opportunities but it comes with a certain risk. Such companies may require more in-depth research as they are new and may not have historical data to be analysed.
Aside from directly buying stocks from publicly traded AI companies, you can also invest in AI Exchange-traded funds (ETFs). By doing so, you are able to invest in a diversified portfolio of AI stocks, which will reduce your exposure to single stocks while maintaining the possibility to earn high returns.
FURTHER READING: 10 European AI start-ups you should be keeping an eye on
FURTHER READING: Should you invest in blockchain? Some important tips to bear in mind