CRUNCH

CITYAM.COM
TUESDAY 4 APRIL 2017
FEATURE
25
Get ready
for the new
tech wave
Thomas Fitzgerald looks at the firms
likely to fuel the next technology revolution
WE ARE now entering
“Tomorrow’s World”. As
visions of the future
become reality, the rise
of tech is touching every
part of the fabric of global politics,
society and the economy. It is an
enabler of growth and change for
every business sector.
Industry 4.0, the rise of smart factories,
and cyber-physical systems, for
example, offer the potential for a
step-change in reliability, safety and
productivity. Similarly, smart-cities
will see greater optimisation of physical
infrastructure via predictive
modelling and real-time data collection.
Technological advancements in
fields such as artificial intelligence
and virtual reality provide new business
opportunities in new markets,
and they raise the competitive barriers
to entry for technology
companies with strong credentials in
these fields.
TRUMP TAX OFFERS TAILWIND
FOR DEVELOPMENT
The new US administration’s tax
plans include provisions for low-tax
rates on foreign earnings repatriated
to the US in order to incentivise companies
to bring their cash onshore.
This could be a major acceleration of
advancement and a boon for shareholders.
For many of the major US technology
firms holding substantial cash balances
overseas, this incentive (if
enacted) could lead to a significant
amount of cash repatriated to the US
for share buybacks, shareholder dividends,
as well as US-based M&A, R&D
and capital expenditure, all of which
have the potential to enhance the
fundamentals of the industry.
This change could have a tailwind
effect on the four major themes driving
the new wave of tech, which are
destined to revolutionise our lives
while offering investors plenty of
opportunity.
RISE OF ARTIFICIAL
INTELLIGENCE AND MACHINE
LEARNING
Major advancements in many of the
underlying technologies such as deep
learning, neural networks and natural-language
processing have led to
the creation of computing systems
that understand, learn, predict and
operate without human intervention.
These developments have catalysed
the rapid growth of embedded intelligence
within products and services,
such as voice-enabled virtual assistants,
autonomous vehicles and
smart homes. In the future, we
expect to see further progress in the
capability of these technologies and
an expansion in their commercial
application across a number of industries,
including health care, transportation
and consumer services.
Key players within this area include
those companies with strengths within
the core buildings blocks of these
technologies:
£ Big data (Alphabet, Facebook and
IBM)
£ Semiconductor producers which
enhance the processing power required
to manage and interpret much vaster
pools of data (Intel, AMD and NVIDIA)
£ Hardware manufacturers in areas
such as sensors, microphones and
cameras required for data collection
and interpretation (Sunny Optical,
Mobileye and Infineon Technologies)
£ Cloud computing services, as we
believe that ultimately these functions
will be offered to enterprises and endusers
as a part of their overall cloud
computing service (Amazon and
Microsoft)
VIRTUAL REALITY TO BECOME
A REALITY
Computer processing capability has
only recently become fast enough to
power comfortable and convincing
virtual and augmented reality experiences.
Companies such as Facebook,
Google, Apple, and Sony are deploying
vast amounts of capital in order
to make these experiences more
immersive, comfortable, and affordable.
Over the next few years, we believe
virtual and augmented reality capabilities
will further improve and
these technologies will be more widely
integrated across PC, mobile and
wearable devices. This will serve
users in enterprise, education, and
health care, as well as the more obvious
applications in consumer and
gaming industries.
CYBER-CRIME IS ON THE RISE
Cyber-crime is estimated to cost the
global economy more than $400bn
every year. With cyber adversaries
growing increasingly competent and
well-resourced, while entities and
individuals continue to process and
store a larger amount of their assets
and information digitally, we believe
that the frequency and impact of
cyber-crime will continue to grow.
In the past, security has primarily
been the responsibility of software
and network providers. However,
with the mass adoption of smart
home devices and increasing connectivity
in life critical situations, such
as automobiles and medical devices,
we believe that security will become
a greater focus for hardware manufacturers
(NXP Semiconductors and
Cisco Systems).
REACHING A NEW LEVEL OF
SCALE
With approximately 2.5bn people
using a smartphone device worldwide,
technology has reached a new
level of scale through a new form of
computing (with cameras, sensors
and sound). This, in our view will
continue to provide a platform to
change the lives of users and significantly
alter the course of numerous
industries.
£ Thomas Fitzgerald is associate
portfolio manager at EdenTree
Investment Management.
AI will push music streaming into the stratosphere
THE LATE, great David Bowie
got it spot on back in 2002.
Telling the New York Times
that music is going to
become like “running water
or electricity,” the Starman singer predicted
the meteoric rise of the streaming
subscription that last week
confirmed its place in the upper echelons
of the industry.
The fragile US music industry saw
retail revenues from recorded music
grow 11.4 per cent in 2016 to $7.7bn,
according to the Recording Industry
Association of America (RIAA). This
was thanks, in no small part, to a
doubling of paid streaming music
subscriptions which helped the
American music business experience
its biggest gain since 1998.
“For the first time ever, streaming
music platforms generated the
CNBC
COMMENT
Matt
Clinch
majority of the US music industry’s
revenues... Streaming grew from just
9 per cent of the market in 2011 to 51
per cent of total industry revenues in
2016,” the RIAA confirmed,
namechecking such services as
Spotify, TIDAL and Apple Music.
It’s an impressive rise but the new
technology has yet to truly capture
any of my cash. I’ve dabbled in the
“freemium” models for some
services and I’ve purchased a few
weeks worth of access to one
particular streaming subscription.
But that’s it. I’ve so far resisted,
clinging on desperately to my vinyl
collection and any CDs I still have
from the 1990s that aren’t scratched
beyond playability. That is, until
now.
Streaming grew
from 9 per cent of
the music industry
in 2011 to 51 per
cent of total
revenues in 2016
With the upcoming launch of
Google Home in the UK and the
advertising onslaught that Amazon
is currently undertaking for its own
smart assistant Alexa, it won’t be
long before there’s a talking robot
nestled between the books on my
dining room shelf.
And there lies the major selling
point for me. Call me lazy, but who
wouldn’t want to shout “play Roy
Orbison’s Crying” at a voicecontrolled
speaker when you’re
about to embark on the chopping of
an onion?
The British Phonographic Industry
is already notably excited at the
prospect, highlighting in a report
that these assistants “are likely to
evolve into our de facto musical
concierges around the home and in
the car.”
And it’s the list of smart
commands that’s a real deal breaker.
Amazon’s official list of voice
commands for Alexa include some
very vague human interactions that
are likely to get some very
interesting results. Think of how
much fun you could have after
demanding it to “play the top rock
songs from 1988?”. Or maybe even:
“Play that song with the lyrics ‘De do
do do de da da da, is all I want to say
to you’.”
It’ll be a party gimmick, the
excitement will wear off after a few
weeks – but ultimately it’s an
enabler and will help me listen to
even more music. Bowie would have
approved.
£ Matt Clinch is deputy digital news
editor at CNBC.com.