Investors are looking at different long term themes to shape their portfolios, with many of them focusing on technology as one of the promising sectors, writes market analyst Bogdan Maioreanu.
In 2022 it was one of the largest losers. Increasing energy costs, inflation and central banks policies to raise interest rates made investors shift from this sector to more defensive ones. The new year however, has brought renewed optimism and as inflation slows the sector might be well positioned for a rebound.
The World Economic Forum that recently happened in Davos, is seeing technology supporting the transition to green energy. Green hydrogen, nuclear fusion and other green technologies are forecasted to continue their development in 2023 in order to accelerate the separation from fossil fuels. According to some estimation the switch from fossil fuels to renewable energy will help economies save 12 trillion dollars by 2050. In the past 12 months the iShares Global Clean Energy ETF (ICLN) went up over 8% and it is up almost 5% this year. In a market that showed mostly losses this is emphasizing the importance the investors are giving to the sector. In Romania, latest data is showing that local production of wind and solar energy increased in the first 11 months of 2022 compared with the similar period of 2021.
In the past 12 months, the technology sector (XLK) lost almost 17% but the beginning of this year is seeing the sector rebound 6.56%. Information Technology is evolving fast, and investors are looking to digital transformation and automation as important investment themes. According to Gartner, worldwide IT spending is projected to total 4.5 trillion dollars in 2023, an increase of 2.4% from 2022. The software and IT services segments are projected to grow 9.3% and 5.5% in 2023, respectively. The devices segment is forecast to decline 5.1% this year as both consumers and enterprises lengthen device refresh cycles. IT spending for 2023 will grow in every country and every vertical industry that the company tracks.
In 2023, Gartner is seeing companies trying to create digital immune systems and optimize resilience, to shield them from the many risks that we observed in 2022, including cyber and supply chain threats. Worldwide artificial intelligence (AI) software revenue is forecasted to total $62.5 billion in 2022, an increase of 21.3% from 2021. The companies will look at how to better use AI and to optimize trust, risk and security management of this technology. Some experts see 2023 as a year when companies will try to better monetise their previous spending in AI developments instead of developing new tools. However, businesses will pursue AI to derive new value from existing datasets.
Romanians may be well positioned to take advantage of long term growth in the tech sector. In the latest eToro Retail Investor Beat survey Romanian investors were asked what long term investment themes they are considering. The poll found out that 39% of the respondents seem to be looking to crypto currencies and digital payments, 33% to digital transformation and 32% are considering clean technology with the same percentage looking into robotics and automation.