Research shows that stocks of innovative companies tend to outperform their less innovative counterparts. In 2023, a year marred by growing geopolitical tensions, innovators demonstrated resilience in the marketplace and also presented potential solutions to the world’s various crises. These were the leaders among them.
Innovation, in the context of thematic investing, is the development of novel and transformative technologies that reshape industries. It encompasses companies that not only introduce groundbreaking technologies or services but also have the potential to disrupt and redefine existing market structures.
Research shows that stocks of innovative companies tend to outperform their less innovative counterparts. GlobalData's Innovation Indices, for instance, have revealed an annualised alpha of 3–8%, aligning with BCG’s finding that innovative firms have a 2.2x higher future earning potential.
This effect is even more pronounced in sectors like artificial intelligence (AI), where the GlobalData AI Innovation Index surpasses the S&P 500 with an 8.5% annualised alpha.
These were the innovators leading market gains in 2023.
The Blockchain Stock: Marathon Digital
Bitcoin’s recovery in 2023 was felt across the blockchain theme, from cryptocurrency exchanges to miners and large holders of bitcoin. None have performed better than Las Vegas-based Marathon Digital [MARA], whose stock is up 542.4% year-to-date as of 20 December, bringing its market cap to $4.9bn. Earlier in December, CEO Fred Thiel informed Bloomberg TV that “We intend to expand considerately” through 2025; five days later, the company announced it would acquire two operational bitcoin mining sites, with a total capacity of 390 megawatts, from subsidiaries of Generate Capital.
The Semiconductor Stock: Nvidia
The boom in generative AI jolted balance sheets and stock prices in 2023. Chipmaker Nvidia [NVDA] rocketed into the stratosphere of giants like Apple [AAPL] and Microsoft [MSFT] when its market cap topped $1trn in late May. Since then, a series of competitors, including Advanced Micro Devices [AMD] and Intel [INTC], have unveiled new products — potential threats to Nvidia’s chip dominance — causing some analysts to suspect shares in the chip leader may no longer be in ‘buy’ territory. Nevertheless, Nvidia’s November earnings report revealed yet another quarterly earnings beat and a raise of its guidance. The company also announced the launch of the H200, its latest graphics processing unit for training AI models. As of 20 December, Nvidia shares are up 239.6% year-to-date.
The Metaverse Stock: Meta Platforms
It’s been a quiet year in the metaverse, but the theme has still performed well on the back of its biggest proponent: Mark Zuckerberg, Founder and CEO of Meta Platforms [META]. Stock in the social media giant has risen 191.1% year-to-date, bringing its market cap to $900.4bn. Despite AI’s gains overshadowing even the company’s own interest in the metaverse, Meta’s impending launch of its second-generation Ray-Ban sunglasses, announced this month, suggests it is repurposing some of its metaverse-driven labours to maintain appeal in the midst of the AI rally. The new glasses feature AI that can access built-in cameras in order to read and interpret images.
The Robotics Stock: Tesla
This month, Tesla [TSLA] showcased improvements it has made to its humanoid robot prototype. A clip posted on X showed the robot picking up and handling an egg and finished with two robots raving to electronic music. While 2023 delivered a number of both triumphs and tribulations — including an October court ruling that its Autopilot software was not, as had been alleged, responsible for a driver’s death — the company’s stock has soared 108.8% since the start of January, bringing its market cap to $817.7bn as of 20 December.
The Cybersecurity Stock: CrowdStrike
As geopolitical tensions surged this year, reports of cyberattacks were on the rise, sending up spend on cybersecurity in response. One of the top beneficiaries of that has been CrowdStrike [CRWD], whose share price is up 145.4% year-to-date, bringing its market cap to $62bn. According to Alex Roll, Investment Strategist at Global X ETFs,cloud-based security firms will have an advantage over their competitors. In a December report, he cited CrowdStrike as an example of such firms, especially given their positioning to upsell to government agencies. The AI-native CrowdStrike Falcon platform is the company’s flagship product, trained on trillions of security events, which in turn enables the majority of security threat detection and response to be automated.
The SaaS Stock: Salesforce
The generative AI boom has ushered in a new era for SaaS firms, chief among those being Salesforce [CRM], which has claimed the title of top AI-driven customer relationship management (CRM) software innovator. Salesforce reported third-quarter(Q3) revenues up 11% year-over-year to $8.7bn, with subscription-based revenues up 13%. Adjusted earnings per share were up over 50% to $2.11. While a challenging macroeconomic climate compelled CRM to cut costs — including laying off 10% of staff in January — its bottom line appears to be on the mend, with the company announcing the hire of 3,300 new workers across its sales, engineering and data cloud teams in September. Salesforce stock is up 98.4% year-to-date, with a market cap of $254.7bn.
The Fintech Stock: Intuit
Intuit’s [INTU] product portfolio includes names such as Credit Karma, MailChimp and TurboTax. In December, the California-based fintech posted Q1 2024 earnings surpassing analyst expectations, according to Zack’s Research. Adjusted EPS was up 49% to $2.47, while adjusted operating profit increased 45% to $960m. Sales ticked up 15% to $3bn. “With data and AI at the heart of our strategy, we're accelerating innovation across our global financial technology platform to fuel prosperity for consumers and small businesses,” commented CEO Sasan Goodarzi. As of 20 December, Intuit stock is up 60.8%, bringing its market cap to $174bn.
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