Technology is the largest single segment of the stock market — bigger than the industrial and financial sectors. It’s also an industry of constant innovation and unlimited potential, presenting enormous investment opportunities for both institutional and Main Street investors. This is great for tech companies needing substantial capital to fund research and development for new products, services and features.1
Moreover, the tech sector generates products and services used by every industry in the modern economy. Therefore, investors engaging with this market are not just putting their money into technology, they’re also investing it across the entire U.S. economy for enhancements to quality, productivity and profitability.2
For example, one of the biggest challenges in the tech industry is how to build a more powerful and long-lasting battery for new innovations — from cell phones and computers to electric cars and solar rooftops. Some experts see the 21st century task of energy storage as comparable with the breakthrough of harnessing oil in the 20th century.3
However, as Uncle Ben once advised Peter Parker, aka Spiderman, “With great power comes great responsibility.” The tech industry continues to be burdened with security breaches and privacy concerns. It is imperative that efforts to ensure and safeguard data evolve alongside innovative products.4
A similar situation exists for the tech investor. The potential for great rewards comes with great risks, and any number of companies can see their share prices tank with the news of a major security breach or other challenge.5
Other risks to the technology industry include political, economic and government enforcement policies. For example, recent reports indicate tech giants Google, Amazon, Apple and Facebook face regulatory scrutiny for issues ranging from privacy to antitrust concerns. Regardless of how such investigations conclude, their stocks tend to experience declines following these types of reports and subsequent news headlines.6
Machine learning is one tech advancement infiltrating other industries. A sub-category of artificial intelligence (AI), this technology enables computers to learn without being programmed for specific tasks. For example, autonomous cars are programmed to operate without a driver, but machine learning is what makes these vehicles able to adapt to various traffic and pedestrian situations they may not have encountered before. From an economic perspective, driverless cars may substantially reduce the current cost of ride-hailing services and even reduce the number of cars owned by a single household. Furthermore, autonomous vehicles are being billed as capable of improved safety while simultaneously allowing riders to focus on other tasks — which could inevitably enhance work productivity.7
AI also is being used for traditionally human roles in corporate jobs, including those in human resources. While replacing a job relying on human judgment with AI may seem counterintuitive, AI can be used for a number of tasks that do not require the human touch, including pre-screening job candidates for roles attracting hundreds of applicants.8 One AI tool enables a candidate to sit for a video interview at home, answering a series of standard questions while it videotapes and analyzes the person’s facial expressions and body language to help determine if the person would be a good fit for the role.9
1 Stephen D. Simpson. Investopedia. May 26, 2019. “A Primer on Investing in the Tech Industry.” https://www.investopedia.com/articles/stocks/10/primer-on-the-tech-industry.asp. Accessed June 3, 2019.
3 Jeffrey Ball. Fortune. May 24, 2019. “The Race Is On to Build a Better Battery.” http://fortune.com/longform/race-build-better-battery/. Accessed June 3, 2019.
4 Rebecca Lake. U.S. News & World Report. Jan. 4, 2019. “4 Things to Know About Tech Investing in 2019.” https://money.usnews.com/investing/investing-101/articles/4-things-to-know-about-tech-investing-in-2019. Accessed June 3, 2019.
6 Jon Swartz. Marketwatch. June 4, 2019. “Feds target four of the biggest tech companies in U.S., and their stocks are getting slammed.” https://www.marketwatch.com/story/feds-target-four-of-the-biggest-tech-companies-in-us-and-their-stocks-are-getting-slammed-2019-06-03?mod=mw_theo_homepage. Accessed June 4, 2019.
7 T. Rowe Price. April 18, 2019. “The Transformative Power of Technology.” https://www.troweprice.com/personal-investing/planning-and-research/t-rowe-price-insights/investments/equities/the-transformative-power-of-technology.html. Accessed June 3, 2019.
8 Bernard Marr. Forbes. May 29, 2019. “Artificial Intelligence In The Workplace: How AI Is Transforming Your Employee Experience.” https://www.forbes.com/sites/bernardmarr/2019/05/29/artificial-intelligence-in-the-workplace-how-ai-is-transforming-your-employee-experience/. Accessed June 3, 2019.
9 Minda Zetlin. Inc. Feb. 28, 2018. “AI Is Now Analyzing Candidates’ Facial Expressions During Video Job Interviews.” https://www.inc.com/minda-zetlin/ai-is-now-analyzing-candidates-facial-expressions-during-video-job-interviews.html. Accessed June 19, 2019.
Content prepared by Kara Stefan Communications
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.