The technology sector covers such a wide swath of industries, from semiconductors to software to electronics, that figuring out where to invest can be daunting. UBS analysts have an opinion: They say that three key trends in technology are about to explode: artificial intelligence, big data and cybersecurity, and that investors should be exposed to them. We couldn’t agree more and are pleased to see UBS calling a number of our Club holdings as shares to own. UBS analysts say the combined revenue from these three trends should rise to $625bn in 2025, from $385bn in 2020, as companies and governments alike increase spending on automation, analytics and security. In his opinion, AI will be the fastest growing at 20% per year, while Big Data and cybersecurity are expected to grow at an average rate of 8% to 10% per year. But UBS says that what the latter two in growth lack, they make up for in their more defensive nature; cybersecurity and analytics are increasingly needed regardless of the macroeconomy. We have long been bullish on these trends and believe that long-term exposure to them is absolutely crucial for investors. That’s a big reason why we’re keen to stick with some of our high-quality tech names, including Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), Amazon (AMZN), Salesforce (CRM), Nvidia (NVDA), Advanced Micro Devices (AMD), through this hectic economic downturn. Big data analytics and AI-driven automation are integral to increasing efficiency and reducing costs in businesses, so they not only receive priority when it comes to budgeting, but also serve as a deflationary force over time. . When it comes to cybersecurity, in a world where data is rapidly becoming the world’s most valuable currency, the ability to protect that data is paramount. Growth is not limited to companies. Analysts say the US government is investing heavily to maintain the country’s leadership in core technologies like software and semiconductor design, including patents. They note that the Chinese government has also initiated high-profile plans to develop its local capabilities in these fast-growing areas, including the “Made in China 2025” plan and the “Next-Generation Artificial Intelligence Development Plan.” Other nations have similar ambitions, the note, including Germany (“AI Made in Germany”), the European Union (“Coordinated Plan on Artificial Intelligence”), Japan (“Artificial Intelligence Technology Strategy”), and Singapore (via its “Smart Nation” and “Digital Government Office”). How to capitalize on these trends? According to analysts, investors should focus on headlines about disruptors; incumbents characterized by dominant market share, robust technology moats with strong economies of scale, consistent growth rates, and strong balance sheets. UBS’s basket of shares is now 90% owned. Members already know why we love many of these headline names and are willing to ride through the short-term ups and downs in search of what we believe is a significant long-term advantage. But here’s what analysts had to say about the names in our portfolio: Alphabet: “We believe Google remains the preeminent franchise in Internet search and advertising. Revenue (along with the digital ad industry) rebounded strongly in 2021, setting Tough Comparisons in 2022. Beyond this tough comparison, we see strong double-digit long-term growth in increased monetization and YouTube, and shared gains in cloud computing. continued cost discipline. Finally, we believe Google has interesting options in areas such as health care, autonomous driving, and artificial intelligence. Key risks in our view include regulation, competition, and cost control. operational”. Advanced Micro Devices: “Advanced Micro Devices (AMD) commands a unique positioning, with a well-established portfolio in the x86 microprocessor and graphics processing unit (GPU) segments. Its leading semi-custom business, providing customers with the flexibility to customize processor and GPU combinations to specific device requirements, it is well positioned to capitalize on structural growth in the AI, data center and console markets. Meanwhile, AMD’s near-term momentum is solid with strong data center growth, healthy notebook demand, and new product innovations Given the growing demand for AI chips, AMD’s high-performance GPUs and central processing units (CPUs) are considered best-in-class for creating a computing platform that accelerates testing of new intelligence applications Risks include slower-than-expected technology migration expected and a potential increase in competition. Cisco Systems: “We view Cisco’s leading market share, ownership, unmatched distribution channels, and acquisition expertise as key competencies. These structural strengths have helped the company respond to changing technology, changing demands of customers and challenging trends in IT demand, and we believe that “The company remains well positioned for the future. Key risks for our view include economic growth, supply chain disruptions, enforcement and competition. Cisco is changing its business model to focus on more software and more recurring revenue. Over time, we believe the company should see a benefit to both gross margin and valuation (P/E and EV/FCF) as the business becomes more annualized and less cyclical.” Marvell Technology: “We like Marvell for its compelling combination of access layer networking and storage controller business portfolio. The former is likely to benefit from multi-year structural growth in 5G, automotive ethernet and data center networks, while the mature storage business provides steady and strong cash flow for R&D expansion in the network area. With a broad product portfolio and potential to extract higher dollar content per base station from its existing customer pool, we believe the company is well positioned to take advantage of opportunities in 5G infrastructure development. Meanwhile, the acquisition of Avera Semiconductor allows Marvell to pursue other 5G-related opportunities in custom systems for chip businesses. Key risks include margin pressure in the form of aggressive price competition from peers and an inability to turn production around quickly.” Microsoft: “In our view, Microsoft has emerged from its transition to a cloud-based model and underwriting better than many peers, and the company is extremely well positioned to gain share as cloud adoption increases. This positions the business to gain “wallet share” within IT budgets, while expanding margins. The valuation appears fair relative to growth prospects, peers and history, but we believe MSFT shares offer an attractive mix of growth and defensive characteristics. Key risks to our view include PC demand, the company’s ability to drive continued margin expansion, difficult comparisons, and the potential for large mergers and acquisitions.” Nvidia: “We like NVIDIA because of its strong growth opportunities. long-term growth in AI, gaming, and data centers. And we believe that the company’s competitive positioning remains well ahead of its competitors from a software, systems and ecosystem perspective. Spending from hyperscale customers will likely remain robust for years to come, underpinning continued demand for its GPUs and accelerators. NVIDIA is also well positioned to extend its leadership beyond the AI training market into the AI inference market as its competitors continue to lag behind. Longer-term opportunities in cutting-edge segments such as autonomous vehicles, robotics and smart cities will likely provide more diversified opportunities. Key risks to our view are potentially increased competition from startups and excess inventories.” (Jim Cramer’s Charitable Trust is long AMD, CSCO, GOOGL, MRVL, MSFT, NVDA. See here for a full list of As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim has discussed a stock on CNBC TV, please wait 72 hours after the trade alert is issued before executing the trade.THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. NO LIABILITY OR FIDUCIARY DUTY EXISTS, OR IS CREATED, BY LIABILITY TO YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. SPECIFIC RESULT OR BENEFIT.
A robot plays the piano at the Apsara Conference, a conference on cloud computing and artificial intelligence, in China on Oct. 19, 2021. As China renews its rulebook for the technology, the European Union is crafting its own framework regulation to control AI. but he hasn’t crossed the finish line yet.
street | Afp | fake images
The technology sector covers such a wide swath of industries, from semiconductors to software to electronics, that figuring out where to invest can be daunting.