The three key areas of AI, 5G and autonomous vehicles are set to drive unprecedented demand for compute power and storage. In order to take advantage of the opportunities, companies in this sector need to continue investing in technology and developing partnerships with end-market customers. Players which can provide higher compute power and more memory will be best placed to capture the content opportunity. Meanwhile, semiconductor/hardware companies could be threatened by cloud providers designing hardware and semiconductor components.

Company specific thoughts:

IBM is likely to benefit from the AI megatrend in light of its Watson platform. Apple (AAPL) could be a major beneficiary of AI and VR/AR-related trends, while the data generated by these technologies – together with autonomous driving – could create strong tailwinds for Micron Technology (MU). APH and TXN are also well positioned to benefit from the rise of autonomous driving, while Amphenol Corporation (APH), Broadcom (AVGO) and Texas Instruments Incorporated (TXN) have well-diversified end markets.

That said, some companies are facing headwinds. While Celestica (CLS) is seeing a mix shift towards emerging non-traditional markets, legacy technology end markets still account for 65%+ of the company’s growth. FLEX will experience headwinds if cloud-based revenues cannot offset declining legacy CEC businesses, while the continuing migration of Hewlett Packard (HPE) to cloud will also pose headwinds.


Technology: Up close

The future will be determined by those who are willing to reinvest, adapt and turn future threats into opportunities.