Bank of America [BAC] analysts led by Haim Israel have identified a list of technologies and innovations they believe will offer outsized growth over the long term. The technologies represent a $330bn market that could be worth $6trn by the end of the decade.
Getting in early on the next big thing is top of the list of any would-be investor. New entrants into the S&P 500 are displacing incumbents at the fastest rate since the index was created. By 2027, the average shelf-life of a company on the index is expected to be just 12 years. Identifying tomorrow’s upcoming investment themes – and the companies driving them forward – could help investors beat the benchmark index.
“Failure to identify future tech today could mean missing out on the next big revolution,” Israel wrote in a client note. “The pace at which themes are transforming businesses is blistering, but the adoption of many technologies – like smartphones or renewable energy – have surpassed experts’ forecasts by decades because we often think linearly, but progress occurs exponentially.”
“The pace at which themes are transforming businesses is blistering, but the adoption of many technologies – like smartphones or renewable energy – have surpassed experts’ forecasts by decades because we often think linearly, but progress occurs exponentially” - Haim Israel
Technologies Bank of America says to watch:
- 6G telecom networks
- Emotional artificial intelligence
- Brain computer interfaces
- Bionic humans
- Synthetic biology
- Wireless electricity
- Electric vertical takeoff and landing flying cars (EVTOL)
- Ocean tech
- Next-generation batteries
- Green mining
- Carbon capture and storage
What this means for investors
Bank of America says that the technologies combined have an average 36% CAGR, with 6G, EVTOL, immortality, and carbon capture being the fastest growing. Ocean tech is the slowest growing of the group.
Telecom companies would be the most obvious beneficiary of 6G technology. While most of us are yet to upgrade our handsets to 5G, 6G would allow you to download the New York Public Library’s entire collection in under 20 seconds on wireless technology. AT&T [T], T-Mobile [TMUS], Verizon [VZ], Samsung [005930.KS] and others formed an alliance to lead on the nascent technology in October last year.
Immortality as a technology to watch out for might raise a few eyebrows, but there are companies with heavyweight backing looking at extending human life. Amazon [AMZN] founder Jeff Bezos is reported to have put money behind anti-ageing start-up Altos Labs. The company is paying top dollar for scientists to research how cells age and how to reverse that process. In 2013, Google-backed research company Calico Life Sciences, which Larry Page described as being focused on “health, well-being and longevity,” in that year’s founders’ letter.
Outside of billionaires, healthcare and biotech is one area that could benefit from growth in the quest to prolong life. These industries would also stand to benefit from the technologies bionic humans and synthetic biology.
As an investment theme, the biotech market is up more than 27.8% this year (through 21 September), while the related healthcare innovation theme has seen a 6.42% gain over the past month, according to our investment screener. Looking at specific ETFs, the ARK Genomic Revolution ETF [ARKG US] is up more than 31.58% this year, outpacing the iShares Nasdaq Biotechnology ETF [IBB US] 27.8% gain in the same period.
Rise of the biotech theme YTD
Miners will likely benefit from the growth in green mining and next-generation batteries. For example, BHP [BHP] has pivoted away from fossil fuels to priorities nickel mining – a key component in lithium batteries. Oil and gas companies have invested heavily in carbon capture to offset emissions, with Exxon Mobil [XOM] predicting this will become a $2trn market by 2040.
Getting in early on the next big thing is easier said than done. The same fundamental rules of investing still apply, and investors need to balance risk and reward. ETFs like ARK Invests that track themes could act as the first step towards benefitting from any outsized growth on the technologies Bank of America has identified.
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