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2022 was yet another year when the world stalled in its post-Covid recovery, particularly in China, as well as having to react to the (largely unexpected) Russian invasion of Ukraine. Markets were forced to react to vastly increased energy and food prices, still rising inflation and central bank policies hiking up interest rates – the end result was the worst global equity return since 2008. Macroeconomics continue to dominate and will likely lead the markets through this year, though the technology sector is well placed to react quickly should the picture become more positive. We feel the current risk/reward is already more attractive and we are particularly optimistic about artificial intelligence (AI), with ChatGPT being the highest profile breakthrough to date. The technology sector is driven by, and is a driver of, change so the Polar Capital Technology team continues to look closely at core themes such as artificial intelligence and cybersecurity as well as emerging themes including clean energy and healthcare AI. Explore the following chapters for more analysis and opinion on all these themes.
Artificial Intelligence
ChatGPT was an extraordinary breakthrough in a remarkable year for advances in artificial...
Clean Energy
There were two developments in 2022 that saw a significant move in the shift to clean energy...
Cybersecurity
Cybercriminals obviously do not read the business pages as cybercrime continued to grow last...
Digital Advertising
Advertising budgets were under pressure in 2022 as the global economy weakened, with even...
Healthcare
The recent successes of large language models (LLMs) powering the likes of ChatGPT show...
Videogaming
Videogaming was an undoubted Covid ‘winner’ as lockdown saw a boom in home...
The Metaverse
First coined in the 1992 cyberpunk novel Snow Crash, the word ‘metaverse’ entered the investment...
Cryptocurrency
2021 was another breakout year for cryptocurrencies, with the total crypto market cap...
Cybercrime incidents continue to grow in both volume and sophistication. Cybersecurity has...
Natural language processing (NLP) remains a key battleground for tech giants fighting for...
On the face of it, healthcare delivered another year of strong absolute growth in 2021...
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Automotive
2021 was a frustrating year for the automotive industry, despite strong demand...
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Artificial intelligence
Digital advertising
Clean energy
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Disruption as a force for good
ChatGPT was an extraordinary breakthrough in a remarkable year for advances in artificial intelligence (AI), with machine learning/large language models helping to provide answers to some of society’s most challenging problems. Is this radical change AI’s ‘iPhone moment’? The industry leaders are already developing models that combine text and imagery to seemingly mimic a human’s chain of thought to carry out ‘reasoning’ tasks rather than ‘performing’ tasks. The next step is to improve the quality of the reasoning, giving us a view of how powerful the next-generation search engine could be. There are huge costs involved but with a significant percentage of the spend to generate incremental growth driven by AI-related demand, there are even more extraordinary times ahead.
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From secular to cyclical as the industry reaches maturity
Advertising budgets were under pressure in 2022 as the global economy weakened, with even the behemoths of Alphabet and Meta struggling (their share prices dropped 38.7% and 64.2% respectively). Increased competition from Apple, TikTok and Amazon, as just three examples, may change the way the incumbents view their own content and associated digital advertising. The headwinds are regulation in the US and Europe being ‘combative’, to say the least, though it is too early to predict the timing of any breakup of the tech giants just yet; the industry is maturing and overall global advertising budgets are set to grow by just single digits. The newest kid on the block is ChatGPT and there is a great deal of discussion about what this might do to the economies of search, in the near and longer term, and how much added competition it will provide and encourage – even Bing is back.
Cybercrime continues to grow with little regard for a slowing economy
Cybercriminals obviously do not read the business pages as cybercrime continued to grow last year despite a slowing economy, with breaches in governments, companies (technology companies included) as well as our own NHS. The costs of these breaches also went up, reaching an all-time high of $4.4m. Meanwhile, spend on cybersecurity slowed although CIO surveys show it is still a key priority, with Gartner indicating the market is still large and underpenetrated, suggesting strong growth potential. AI and M&A may change how the sector looks though the need for cybersecurity remains, with several changes in technology applications coming that will hopefully expand its addressable market over the medium term.
The weaponization of energy security and rise of sensible policy
There were two developments in 2022 that saw a significant move in the shift to clean energy solutions – the war in Ukraine and the subsequent ‘weaponisation’ of energy security as energy prices skyrocketed, and the Inflation Reduction Act (IRA) in the US. The IRA finally puts in place a mechanism, in the US at least, to release funds to businesses to help combat climate change. Both solar and hydrogen power will benefit from the improving policy, economic and financial framework; they will also benefit from key technologies and industry-specific expertise such as, for example, those related to energy supply, fuel cells and electrolysers. There are going to be bumps in the road, but the trajectory is clear as we identify investment opportunities arising from the transition away from fossil fuels towards clean energy.
Scratching the surface of vast potential for AI in healthcare
The recent successes of large language models (LLMs) powering the likes of ChatGPT show the huge potential applications they offer healthcare, a regulated, risk-averse sector ripe for technology-led innovation. It could finally be possible to analyse the vast amount of unstructured data, including medical records and other clinical data, to improve system bottlenecks and, importantly, save doctors’ time. It is still early days for the incorporation of LLMs – and artificial intelligence in particular – into healthcare to generate meaningful outcomes but the potential is vast and the tech heavyweights are already involved.
What next after two years of lockdown-fuelled growth?
Videogaming was an undoubted Covid ‘winner’ as lockdown saw a boom in home entertainment. However, the market had a tough 2022 with demand falling as time spent playing video games dropped to more usual levels while the slowing global economy meant disposable income available to spend on games fell. A positive sign is that, relatively, revenue remained strong (read ‘slightly down’) while the addressable market should continue to grow as populations expand and the number of new platforms increases. Support for the sector should also come from the availability of improved next-generation consoles and a stronger lineup of new games.
