Investing in emerging technologies in 2024

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The rapid growth of disruptive technologies such as artificial intelligence (AI), robotics and automation, and cloud computing has presented significant investment opportunities. These technologies are powering digital transformation in business and setting the stage for other solutions like the metaverse, cryptocurrencies, and biotechnology. But with these opportunities comes risks, making it important for investors to carefully consider their goals and risk tolerance. 

In this article, we will discuss the top emerging technologies to consider investing in and the potential they hold for the future. From AI to cloud computing, here’s how you can capitalize on the growth of these game-changing technologies.

The rapid growth of disruptive technologies

• Artificial intelligence (AI) – The generative AI market could grow to $1.3 trillion by 2032, up from $40 billion in 2022, according to a report from Bloomberg Intelligence. Compound annual growth rate: 42 percent.
• Robotics – The industry could reach $218 billion by 2030, up from $62.7 billion in 2022, according to GlobalData. Compound annual growth rate: >16 percent.
• Cloud computing – The cloud market could rise to $2.4 trillion by 2030, from $678 billion in 2023, according to Fortune Business Insights. Compound annual growth rate: 20 percent.

Emerging technologies to consider investing in

Among the most impactful technology advancements are artificial intelligence, robotics and automation, and cloud computing. These top new emerging technologies not only power digital transformation in business, but set the stage for other solutions, including the metaverse, cryptocurrencies, biotechnology, and many others.

Artificial intelligence (AI)

At its core, AI attempts to replicate human intelligence in a computer or machine with faster speed and greater accuracy. Companies such as Alphabet and Microsoft employ the technology to program machines to solve problems, answer questions, and conduct tasks previously done by humans.

And just like the human brain, the more information AI receives and stores, the greater its potential. For example, the banking industry uses AI to improve decision-making in high-speed trading, automate back-office processes such as risk management, or even reduce costs by using humanoid robots in branches. Similarly, AI powers self-driving cars and even movie recommendations from Netflix.

But how does AI get incrementally smarter? Through processes like machine learning, a sub-field of AI. By combining big data, complex computational models, advanced mathematics, and other methods, machines have the capacity to store and analyze new information at lightning speed. And the more input they receive, the greater the accuracy.

Like other thematic investing — such as blockchain technology, cybersecurity and genomics — retail investors have access to AI exchange-traded funds (ETFs). For example, the fund Global X Robotics & Artificial Intelligence ETF (BOTZ) holds a basket of companies involved in all phases of AI, from development to implementation.

Robotics and automation

Companies are also turning to robotics and automation to program robots to mimic human tasks, such as driving or even making the perfect latte. These machines can perform jobs independently or with minimal human assistance, streamlining processes and improving efficiencies.

The robotics industry comprises two main areas: industrial robots and service robots. By developing rule-based software and sleek user interfaces, robotics has the potential to disrupt much of the labor market.

Tesla, for example, has developed a human-like robot called Optimus and it announced the latest version in late 2023. The robot is 5 feet 10 inches in height and weighs 130 pounds. It can perform jobs that would be tedious or risky for humans.

Tesla CEO Elon Musk has labeled the project the “most important product development” for Tesla, highlighting that it could be one possible solution to the United States’ labor shortage. And over time, the billionaire investor believes it could even be even more significant than the company’s vehicle business.

Likewise, companies such as Amazon rely on robotics and automation to improve productivity, reduce costs, build resiliency, and increase worker safety. Autonomous mobile robots could eventually take over most physical tasks, from delivering totes to employees to transporting carts or emptying packages.

Robot sales in North America set records in 2021 and 2022, with sales reaching $2.4 billion in 2022, according to the Association for Advancing Automation. 

And the trend likely won’t change, according to analysts, who explain that the prolonged shortage in the labor market caused by the pandemic has propelled digital investments across industries.

Retail investors looking to gain exposure to robotics and automation have access to ETFs such as ARK Autonomous Technology & Robotics (ARKQ) and ROBO Global Robotics Automation Index ETF (ROBO).

Cloud computing

Cloud computing supports on-demand access to data and information via the internet, providing seamless connectivity and flexibility. Compared to traditional on-premises data storage, organizations have turned to the cloud to scale their digital ambitions, including AI, robotics and automation.

In essence, the cloud provides the foundation for organizations to innovate faster. From achieving greater security to democratizing access to data across the organization, cloud computing continues to gain traction across industries.

For these reasons, companies such as Amazon and Microsoft have aggressively expanded into the cloud market.

Amazon Web Services, the retail giant’s cloud division, has become one of the dominant cloud-computing platforms, generating revenues of $90.8 billion in 2023, up 13 percent from 2022. Similarly, Microsoft’s cloud revenues reached $124.3 billion in calendar year 2023.

Plus, the adoption of cloud computing transcends enterprises, as governments and other institutions around the world embrace the technology to keep up with the pace of innovation.

As companies increasingly move their applications and operations into the cloud, some estimates place the cloud computing business as a $1 trillion opportunity.

For those looking to gain exposure to the cloud market, the Global X Cloud Computing ETF (CLOU) and First Trust Cloud Computing ETF (SKYY) invest in this space.

How to invest in new technologies

Investing in innovative technology can be an exhilarating journey, providing you with the opportunity to tap into advancements that could shape our future. To navigate this exciting landscape, consider the following strategies:

1. Stocks: Look into individual stocks within booming sectors like AI, robotics, and mobile technology. By investing in these stocks, you’re placing your bets directly on companies pioneering breakthrough technologies.
2. ETFs: ETFs present a way to invest in a diversified selection of emerging technology stocks, helping to balance your portfolio and temper risk.
3. Thematic ETFs: These funds focus on specific facets within the technology sector, such as AI or robotics. This targeted approach allows for concentrated exposure to potential growth areas.

Remember, while emerging technologies can offer impressive growth potential, they also present higher risks due to the volatile nature of the tech sector. It’s crucial for investors to brace for market fluctuations and thoroughly consider their risk tolerance before committing funds.

Risks of investing in new technology

Investing in cutting-edge technologies, while potentially rewarding, carries its own set of risks. As an investor, it’s crucial to be aware of these challenges to make well-informed decisions. Here are key risks to consider:

• Uncertainty: Many emerging technologies are still in developmental stages, making their market success unpredictable. This unpredictability can pose significant risks.
• Regulatory changes: The tech sector can be subject to sudden regulatory changes, which can impact emerging technologies, creating uncertainty and potential liabilities.
• Future growth predictions: Predicting future growth in the realm of new technologies is challenging. Striking a balance between the potential for high returns and the risk of significant losses is crucial.
• Management team: The success of a tech company often hinges on its leadership. The ability of the team to navigate the complexities of the tech industry can greatly impact investment outcomes.
• Competitive Landscape: The tech industry is fiercely competitive. The success of your investment could largely depend on the strategies and strength of competing companies.

Investing in emerging technologies can offer significant growth potential, but it’s important to remember they also come with higher risks due to the volatility of the tech sector. Always consider your risk tolerance and consider consulting with a financial advisor before making investment decisions.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.