Technology companies have been rapidly growing over the past 20 years, leapfrogging financial and consumer stocks in terms of market dominance and performance. With frontier technology and constant innovation, the growth opportunities in the tech space seem limitless. With such high valuations, is this growth sustainable?

04:45 - Overview of the different technology funds available on Endowus

09:30 - How much more you save in fees with Endowus

11:50 - Introduction to the all new Endowus Tech Portfolio

13:45 - An introduction to our panelist’s firms

20:15 - Why should you still invest in technology?  

28:00 - Is the explosive growth in technology still going to continue?

32:00 - What are the most promising sub-sectors in technology?

41:45 - Tech investing beyond the US

45:45 - Thoughts on the recent China Tech correction and policy risks

51:00 - What sets apart each firm’s technology fund?  

58:40 - Does investing in private companies make sense for traditional public market investors?

1:05:00 - Live Audience Q&A

Excerpts from the webinar

Why should you still invest in technology? (20:15)

Radhika: Technology allows exposure to global growth opportunities. Tech stocks have led the market in the last five years and there is a huge opportunity cost to not invest in these companies. The companies in this sector improve efficiency and productivity of processes.

They are so disruptive that their products and services are taking share from many other sectors right now. We’re very much only at the start of the digitisation process.

Ben: Technology has been the best performing sector in the past 2 decades. Investing in technology means investing in the future. Not only has technology driven much of the MSCI ACWI returns over the past 20 years, technology’s share of equity in markets has grown from 6% in 2000 to 32% in 2021.

Just take a look at the level of technology innovation over the past 10 years compared to that of the decade of 2000 to 2010. It’s much faster and shows how technology is only going to be increasingly important in the coming years.

Is the explosive growth in technology still going to continue? (28:00)

Radhika: There are still opportunities with technology, as it is not only relevant in the cyber world, but also in the real world around us. Many parts of our lives are still early in terms of the digitisation spectrum. There’s still a huge addressable market that remains. Technology is still very much needed in areas such as those of infrastructure, 5G networks and clean energy. That’s the difference in demand now from that of the bubble in the 2000s.

Source: Fidelity

Paul: Businesses that embrace digital solutions have strong recurring relationships with their customers. They are better able to leverage data to gather insights. The pandemic actually helped to teach businesses and people to be more productive with technology.

What are the most promising sub-sectors in technology? (32:00)

Paul: These are the 3 areas of Cloud computing, IoT and E-Commerce. Firstly, cloud computing has been a priority for businesses to allow them to scale. Spending for cloud services has not reached its peak, representing future revenue opportunities.

Secondly, IoT refers to the connecting of devices to other ones through the internet. For example, a clothing store owner can use sensors to detect areas in their shop where customers tend to linger around the most, and strategically place items there. Imagine the growth if more and more businesses embrace the interconnectivity of these devices.

Finally, E-commerce, and this is not only seeing a higher number of users, but each transaction size is also getting bigger, as e-commerce firms increase penetration rates.

Radhika: There are many types of businesses. Some are more cyclical, such as semiconductors, some are more defensive like those in software, while others have a more ‘winner-takes-all’ approach like those in the internet space.

In addition to what Paul Zhuang mentioned earlier on Cloud Computing, there are also advances in this space such as that of Edge Computing, and also those in applications such as streaming or cloud based gaming.

Ben: We classify our own definition of long term investment themes. For example, a technology theme we call New Industriesfocuses on sub-sectors such as telemedicine, online education, space and many others. These are disruptors of traditional businesses, taking more market share with their advantages.

Source: BlackRock, June 2021

Tech investing beyond the US (41:45)

Radhika: While we always talk about Amazon, there’s no reason why you can’t invest in a local e-commerce player in Japan, Russia, Latin America for example, which we do in our various portfolios. Or why not invest in a software developer in Europe or the UK? On the supply side, there are rising technological hubs at many places globally. For example, China is becoming an increasingly important innovation hub.

Have more questions about how we approach technology investing and about our technology portfolio? See our previous Insights article as we take a deeper dive here