In today’s Exponential Investor…
- 12 years of tech boom
- Mining, cars and Netflix
- Tech investing is dead and here’s why
It wasn’t quite March 2020.
But it was close.
At least on the US markets. And in crypto.
The thing is that when we talk about the US market now, we are also talking about tech. The composition of the lion’s share of the US market is “Big Tech”.
Apple, Google, Tesla, Facebook, Amazon… all tech.
Investors love tech. They love tech because the last 12 years has seen one of the most lucrative bull runs we’ve ever seen in history.
Most of this driven by “tech stocks”.
However, what is a tech stock? After all, this term is bandied about all the time. The mainstream loves to talk about tech stocks. Investors love to talk about the tech stocks they’re invested in. Some even suggest that bitcoin and crypto assets are, or at least behave, like tech stocks.
So, does this continue for the next 12 years? Is “tech” the best place to invest your money to build your wealth?
It is. And I’ll tell you exactly why…
We’re all tech stocks
BHP is one of the world’s largest mining companies. It’s not exactly what you would call a tech company.
Volkswagen is one of the world’s largest car companies. It too isn’t exactly what you’d call a tech company.
Sit them both alongside Netflix, for example, and the instant view to most people would be Netflix is a tech company and BHP is a mining company and Volkswagen is a car company.
That’s a fair assumption to make.
But what if I was to suggest that BHP was in fact a tech company. And Volkswagen is more of a tech company than Netflix?
It’s a different way of thinking about what tech is and what isn’t tech.
When you look at the research and development spending of these companies you can see that in reality they’re all tech companies.
For the 2020 year, BHP spent around $517 million in research and development (R&D). For the same period Netflix spent around $1.8 billion.. And for Volkswagen, well it’s slightly more complicated. It has many parts to its R&D spend. But to give you a guide, the company will look to spend around €27 billion on digitisation alone.
But Volkswagen isn’t a tech company, right?
My take on this is that when it comes to tech, you’re looking in the wrong space if you want to invest in tech companies.
In fact, in my view, tech investing is dead.
That’s because everything is a tech company now.
The way our world has developed through the 20th century and into the 21st is that technology integration is a must for companies to maintain their position in the market.
The car is a perfect example. It is not just a device to get you from a to b. Years gone by, perhaps. But the car now is an integral piece of technology in people’s day-to-day lives.
A company like Volkswagen is more a tech company now than a car company because it knows the central role the car is going to play in a data-rich, connected life.
The car is fast becoming the most important connectivity point of contact outside the smartphone. That’s why Volkswagen and other car companies around the world are so progressive and forward looking when it comes to the integration of tech into their cars.
BHP is arguably a tech company as well. It’s been a pioneer for a number of years in autonomous systems. In fact, it’s rolling out autonomous trucks as part of its drive to introduce new technologies to reduce risk and overheads of the company.
Its use of technology is to try and reduce its overheads by over half a billion dollars this year relative to its 2019 financial year.
That’s a mining company going big on tech, or a company that’s focused on the implementation of tech to be a better mining company… which supplies a lot of crucial materials to the companies around the world also rolling out new technologies.
BHP and Volkswagen are exactly why the idea of tech investing is dead.
If it’s dead, what do you do?
I should probably clarify at this point, tech investing isn’t actually dead. It’s the idea of “tech stocks” being dead because everything is a tech stock.
It’s the wrong mindset to take when looking for tech investments. You are in effect looking at arguably every stock that exists on the markets today.
If you’re wanting to invest in tech, you need to now be far more specific. The diversity of what is tech now is so great because everything is starting to be more connected, produce more data and require more technology to keep it relevant and useful.
Instead of investing in “tech”, think to yourself what elements of investing you really want to be focusing on.
Investing in quantum computing, artificial intelligence, autonomous systems, data and connectivity, augmented biology, augmented reality, 3D printing, genetic engineering… decentralised finance and a new global monetary system.
The list is bigger, but that’s the real focus you should be taking – defined areas of breakthrough tech that has the potential to boost your investment portfolio.
Tech investing is no longer just about tech. It’s too broad, to undefined.
To be a great tech investor for the next decade and beyond, you need to really catch on to the big mega trends, rooted in technology innovation and development.
So drop the “tech” investing angle. Get to know what these big technology developments entail and become the next great crypto investor, AI investor or quantum computing investor.
Those are where you’ll really find the big moves for your portfolio.
Editor, Exponential Investor