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The US earnings season is now getting underway and the focus of attention will be on the mega-cap technology stocks. They have been the decisive factor in portfolio performance for the past year or more but in recent weeks have started to slip, and investors are turning their attention to small-cap stocks. Indeed, earnings estimates for the ‘magnificent seven’ US technology firms have been slipping.

While investors need to be alert to this as a crucial factor for portfolios, there is also a need to take a much longer view on technology. Here, there is a range of useful recent publications from leading universities and think tanks – notable amongst them are the MIT Technology Review, the World Economic Forum’s Top 10 Emerging Tech Trends and McKinsey’s Technology Trends Outlook.

It is worth noting that many of these trends are nascent and effectively accessible through venture capital, but even at this early stage, a number of them are worth thinking about in greater detail as their ecosystems begin to develop. 

I would highlight the following ones:

What’s next after AI?

There is a consensus that AI – at least as far as generative AI is concerned – is in a bubble, in both public and private markets. Notwithstanding this, the next ‘phase’ in AI is beginning, and it will see far more skilled use of AI (by specialists like doctors and soldiers) in complex industrial processes. For example, Sanofi uses it in the drug discovery process and Aramco uses AI to manage the complexity of running multiple oil and gas wells. 

Relatedly, AI will be increasingly applied to very specific proprietary data sets in multiple realms, from options trading to the production of chemicals.

Greater computing power and connectivity

An interesting, underestimated development that followed the ratification of the EU AI Act this year was the announcement by the EU that it would create centres of excellence in supercomputing. The move reflects the reality that a related trend to the rise of AI is the creation of vastly more powerful forms of computing (quantum) and modes of telecommunication. 

Quantum computing involves the deployment of quantum mechanics to create chips and hardware with hugely superior computing ability, for example, potentially strong enough to hack blockchain. It’s also an area where Europe is arguably ahead of the US and China, and this technology will have many use cases – in the design of chemicals, cybersecurity and complex financial calculations.

In this field, another development that is perhaps more germane to our everyday lives is a range of technologies that aim to enhance the connectivity of telecommunications – the arrival of 6G is already being heralded, and the importance of satellites to the space economy is something we will hear more about, not just in terms of private networks like Starlink, but also in terms of the risk of space wars.

In detail, this is an exciting area – scientists are developing ‘reconfigurable intelligent surfaces’ (RIS) to facilitate the more efficient flow of telecom signals. There is also a budding industry in what is called HAPS (High Altitude Platform Stations), which in some cases are balloon-like structures in space that enhance signal flow.

Greener technology

The arrival of cheap Chinese electric vehicles in Europe has started an important debate on competitiveness and on green technologies. Indeed, the new Labour in the UK has made ‘Green Technology’ a centrepiece of its industrial policy with the forthcoming launch of ‘GB Energy’ and the early roll-out of onshore wind energy.

Staying with carbon, there is a fast-growing industry in carbon extraction, where already large European firms like Climeworks have built a technology that, in effect, ‘hoovers’ carbon out of the air and buries it (in this case, their first significant plant is in Iceland). Other scientists are experimenting with carbon-capturing microbes.

We also note the rise of more efficient forms of energy, such as the growing deployment of energy pumps, innovations in super-efficient solar cells, and in many countries, the commercialisation of small-scale nuclear reactors. 

In many countries, nuclear energy is ‘off the policy menu’ but advances in technology mean it is a more flexible form of energy, and as a sector, it is spawning new innovations such as the commercialisation of the nuclear-based power source used in the Mars probe.

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