When you think about innovation, progress, and the future, what comes to mind? Chances are, your mind goes to futuristic devices, space travel, and sparkling cities – or simply technology.
Technology is omnipresent and shows no signs of slowing down. Phones, laptops, and tablets are integral parts of our lives, to the point where if someone asked “When was the last time you went a full day without any sort of screen?” many of us simply wouldn’t have an answer.
This has had a big impact on the world of finance, too. Financial technology, or fintech, is a growing industry with massive potential, with versatile applications such as e-wallets and online banking.
Alongside fintech, the technological advancements of recent years have also impacted investments, both creating new investment opportunities and changing the existing market.
So, how do you know where to invest? How might the market change in the future?
Today, we are joined by Lucas Birdsall, a Vancouver-based executive with years of experience in risk management, market analysis, and investment.
He is currently employed as a Venture Capitalist at Parabellum Capital Strategies Ltd. – a Canadian merchant banking firm dealing with venture investments across natural resources, pharmaceuticals, and technology – and has previously worked as the CEO for BMGB Capital Corp. and Castlebar Capital Corp.
“Tech can be pretty volatile at times,” Birdsall remarks. “The industry had a great period of growth around the 2010s, but then hit a significant rough patch around 2022; the growth rate plunged as supply chain issues, inflation, and increased competition wreaked havoc on many companies.”
In early 2023, employee layoffs in the tech industry spiked to record highs. Demand for tech decreased. However, things are beginning to look optimistic again.
Lucas Birdsall explains that to combat these challenges, many tech companies have shifted focus to maintaining and improving returns, cost efficiency, and sustainability.
“It’s created a big push to keep investors in the positives so that they don’t lose funding,” he says, “and since tech impacts nearly all areas of our lives, it’s definitely not going anywhere. The trick now is to figure out where to focus your money.”
Currently, many investors are looking to AI for long-term results. It’s obviously an exciting new industry full of potential. And indeed, the biggest tech stock booster right now is corporate spending on AI.
But just because an industry looks appealing doesn’t mean that it’ll last. It’s critical to consider where future profits will come from and how sustainable the growth is.
According to a recent article by U.S. Wealth Management, a good indicator of how AI will perform is productivity growth. Productivity measures how much labour is required to create an output.
Since 2022, we have seen an upward tick in productivity and AI has been a part of that conversation. If AI continues to help improve productivity, then this will result in a rise in corporate earnings, stock valuations and individual profitability.
The last 5 years have seen tech stocks outpacing the general stock market. The year of 2022 was an exception to this, with stocks in every industry seeing a decline.
The question that remains is – ‘will tech stocks be sustainable in the long run’? The technology sector is always susceptible to short term volatility, but with continued corporate capital spending there is a predicted bright future for long term investments.
So, is it worth investing in tech stocks? According to Birdsall, yes to some degree. “It is wise to keep your options open by not investing solely in tech,” says Birdsall. “Diversification in other areas is always a good idea, and especially now with so many products and tech-industry niches in flux.”
The continued growth and popularity of the sector will make it a perpetual hotspot for investors of all backgrounds. Of course, we can’t fully predict the future, but if you are looking for an industry with a history of continued productivity, then tech might be the right investment option for you.
