The future is automated. From robotic police officers to drones delivering parcels, automation is no longer a distant reality but a present-day marvel. Cities like Tokyo, Singapore, and Dubai are already embracing this technological revolution. Automation is not just about convenience; it also offers enormous investment opportunities. According to BlackRock, the world's largest investment manager, technological breakthroughs are one of the key investing megatrends.
Can I Profit from This Trend?
Many high-profile institutional investors are already betting big on the potential of automation and robotics. Technology advancing at an exponential rate makes investing in automation both exciting and risky. Nevertheless, there are pockets of opportunity you might want to take a closer look at.
What is Automation?
Automation is the technology that allows processes to occur with minimal human intervention. It aims to increase productivity, minimize errors, and improve safety. Automation is driven by both investors and consumers. Investors demand growth in earnings, while consumers demand faster services and higher-quality products. Automation is not new; it has been a significant trend in manufacturing and retail for the past decade.
The Driving Forces
Investors: They demand consistent growth in earnings from the companies they invest in.
Consumers: Raised expectations for faster services and higher-quality products are pushing businesses towards automation.
Global Trends: Rising income levels and living standards are increasing the demand for in-home automation services.
Industrial Automation: The Factory of the Future
Industrial automation focuses on machine-based processes in manufacturing. It aims to create fully automated supply chains that can operate 24/7. Allied Market Research predicts that the global market for factory automation will grow by an average of 9% a year until 2025.
Investment Strategies in Industrial Automation
ETFs: Consider investing in exchange-traded funds like Global X Robotics & Artificial Intelligence Thematic ETF to diversify your risk.
Individual Companies: Look at global industrial giants like Emerson Electric, Honeywell, Siemens, ABB, Mitsubishi Electric, and Rockwell Automation.
Key Metrics: Pay attention to R&D spending relative to sales, sales and earnings growth, and cash reserves.
Home Automation: The Smart Money is in Smart Homes
Smart homes are already a reality with devices like Amazon's Alexa and Google's Home. Companies like Philips provide smart lighting, while telecom companies like Comcast offer bundled services.
How Can I Invest in Home Automation?
Diversify: Invest in companies along each stage of the supply chain.
Big Tech: Amazon and Alphabet are significant players, but don't overlook smaller companies making inroads in this sector.
Robotics: The Rise of the Machines
Robotics is a major subset of automation. Industries like automotive and healthcare are already using robots for various processes. Statista predicts that the global robotics market will grow from $39 billion in 2017 to $500 billion in 2025.
How Can I Invest in Robotics?
Individual Companies: iRobot, KUKA, Cognex, Fanuc, ABB, and Rockwell Automation are some of the key players.
ETFs: Consider the ROBO Global Robotics and Automation ETF, the Global X Robotics & Artificial Intelligence ETF, and the iShares Robotics and Artificial Intelligence ETF.
Actively Managed Funds: Pictet – Robotics and AXA Framlington Global Technology are two such funds that focus on robotics.
Artificial Intelligence: The Game-Changer
AI is the most exciting area of automation as it drives advances in other areas. Companies like Apple, Alphabet, Amazon, IBM, Microsoft, and Tesla are at the forefront of the AI revolution. Morgan Stanley forecasts that the AI industry will generate $1 trillion in annual revenue by 2050.
Who Are the Key Players in AI?
Big Tech: Apple, Alphabet, Amazon, IBM, Microsoft, and Tesla are leading the AI revolution.
Semiconductor Industry: Nvidia, Intel, Micron, and Qualcomm provide microchips to tech giants and are a good indirect investment option.
ETFs and Funds: Consider investing in ETFs like the Amundi Stoxx Global Artificial Intelligence UCITS ETF or actively managed funds like the Pictet Robotics fund.
Automation and AI offer promising investment avenues. Whether you're interested in industrial automation, home automation, robotics, or AI, there are multiple ways to invest, including individual stocks, ETFs, and actively managed funds.