Fiducia Partners Insights - Three Ways to Invest in the Fourth Industrial Revolution

Three Ways To Invest In The Fourth Industrial Revolution

August 16th, 2018 Posted by Investment 0 thoughts on “Three Ways To Invest In The Fourth Industrial Revolution”

The Fourth Industrial Revolution (IR 4.0) is making an impact on sectors around the world. The possibilities of artificial intelligence, robotics, the Internet of Things, autonomous vehicles, energy storage, and nanotechnology are endless.

 

Each of the three previous industrial revolutions provided healthy returns for those who invested in companies involved in the development or early application of the technologies that powered them, this one will be no different. As innovative technology becomes more widespread, a topic that frequently comes up in my conversations with CEOs and other investors is that they are worried about finding themselves left behind if they do not adapt. This presents huge investment opportunities.

 

Emerging portfolio opportunities

 

Given the complexity of the Fourth Industrial Revolution and its natural progression from the Third Industrial Revolution driven by computerisation and automation, many of us are already participating in the revolution, perhaps without knowing it. This can make it difficult to identify which are the emerging trends and how we can consider incorporating them into a portfolio. To help, here are three key areas I see emerging as part of IR 4.0.

 

1. Smart Infrastructure

 

It is clear that our current infrastructure falls short of what is needed both now and for the future. Just maintaining roads, bridges and tunnels is not enough, we need smart buildings, smart power grids and smart transportation infrastructure to satisfy urbanisation and our rapid population growth. McKinsey & Co estimates that to keep pace with projected GDP growth, spending on power infrastructure alone will need to average $1 trillion per year until 2030.

McKinsey & Co Estimated Infrastructure Spending ($TN)

 

McKinsey & Co Estimated Infrastructure Spending

Source: McKinsey & Co

Companies that develop intelligent meters, smart roads, and smart buildings will be at the forefront of the push to build more intelligent infrastructure and those who invest in them will benefit from McKinsey & Co’s spending estimates.

 

2. Artificial Intelligence and Robotics

 

Artificial Intelligence (AI) is helping many businesses automate administrative tasks and allow employees to focus more on productive activities. As businesses continually seek ways to enhance productivity, investment in this technology is likely to keep going up and up. By 2035 Accenture projects the market value of AI to sit at around $814 billion in the UK and $8.3 trillion in the US. Only recently Samsung announced it will invest over $22 billion in AI, 5G and electronic components for future cars.

 

Once considered a futuristic dream, the robotics market too has risen in popularity in recent years and its outlook is lucrative. I read an interesting article in last Thursday’s Evening Standard by Paul Donovan, global chief economist of UBS Wealth Management, who talked about local robots and digitalisation replacing cheap foreign labour so supply chains become shorter and allow companies to make goods “on demand” rather than waiting weeks for items to travel from the other side of the world. Robots have also moved beyond industrial use and are beginning to assume the roles of personal assistants, delivery vehicles, drones and surgical assistants. The increasing integration and declining costs of robotic technology offers opportunities for investors and businesses in all sectors.

3. Storage

 

As nations and intergovernmental organisations around the world push towards sustainability and reduced pollution, demand for electric vehicles and improved battery storage is rising sharply.

 

The UK government recently announced its plan to ban new diesel and petrol cars and vans from 2040 with President Macron of France announcing similar plans presenting a big opportunity for investors. New battery technology will be key to the mass adoption of electric cars along with a wider reduction in our environmental impact. According to data compiled by Stratistics MRC, the global lithium-ion battery market accounted for $29.86 billion in 2017 and is forecasted to reach $139.36 billion by 2026 growing at a CAGR of 18.7%. It may surprise you to hear that already electric car, solar panel and energy storage manufacturer Tesla is currently valued at $64bn compared with $53bn for General Motors and $40bn for Ford.

 

While many of the technologies associated with the fourth industrial revolution have already seen investment manias come and go, I think this is an investment area with long-term potential.

 

If you would like to talk to us about opportunities to invest in these sectors please do get in touch.

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