Finding new technology to invest in: A guide

Looking for new technology to invest in? 

Pull up a seat and join the club. 

New tech is always a popular and exciting investment idea since groundbreaking tech advancements tend to attract gobs of money. However, tech is a volatile sector, and these companies infrequently experience success on a linear basis. 

Therefore, investors looking for straightforward profits may get frustrated. But new tech will always have an allure that few other industries can match. This article will review some of the more prominent ideas in new technology.

Understanding the investment landscape 

One of the core tenets of any new technology is the reduction of friction. How can our lives be made easier by advances in these fields? Think of past instances of how new tech improved or simplified our lives. For example, remember having to write and mail a check if you wanted to pay a bill? It happened, and it was terrible! 

Fast internet and smartphones allow consumers to pay with the swipe of a touchscreen. If you’re looking for the best new technology to invest in, consider advances that reduce some tedious or difficult activity and look for the tech companies honing in on these ideas.

Artificial intelligence (AI) 

Artificial intelligence became one of the focal points for investors in 2023. Thanks to new programs like OpenAI’s ChatGPT, millions now have access to at least a rudimentary form of AI. While plenty of people use ChatGPT to cheat on their college courses, the foundation has been established, and new advances could take AI from novelty to necessity. 

For starters, autonomous vehicles and robotics could significantly change how the labor force operates worldwide. Driverless cars could reduce congestion, limit pollution and open up land currently required for parking. While robots taking human jobs has always been the biggest AI-induced fear, a more hopeful scenario exists where robotics makes dangerous jobs safer, like mining or utility maintenance.

Cloud computing 

Cloud computing is one of the newer technologies that is easy to visualize. Cloud computer systems allow sharing data, resources and power that can significantly reduce time, costs and strain on networks and servers. The International Data Corp. (IDC) estimates total spending on cloud computing services will reach $1.3 trillion by 2025.

Some examples of cloud computing applications include: 

• Companies can outsource cloud computing services to third parties, significantly cutting IT services and infrastructure costs.
• Instead of requiring expensive servers and time-consuming maintenance, data is stored offsite and accessed by anyone within the company. 
• Multiple employees could simultaneously operate on the same files and programs, improving productivity and cutting costs. 

Cybersecurity

Sensitive data is stored in the cloud due to cloud computing. That process will make cybersecurity an even more critical focus than it is today. In 2023, cybersecurity firms should take in more than $162 billion in revenue. By 2028, that number could exceed $256 billion as more and more developing nations begin to come online.

Every company with an online footprint needs a cybersecurity strategy to protect its data and services from malicious attacks. Even individuals protect their personal information with cybersecurity systems since data breaches occur frequently, and remote work is becoming more prolific across all industries.

The metaverse 

The metaverse is a new spin on an old idea. Virtual reality platforms have been around for a while. Still, the metaverse is the idea that users can create virtual worlds where participants can engage with each other for business and leisure, not just to level up their video game avatars (although immersive online gaming remains a big selling point). 

Facebook founder Mark Zuckerberg has bet big on the metaverse, even rebranding his company Meta Platforms Inc. NASDAQ: META. 

Internet of Things (IoT) 

Similar to cloud computing and the metaverse, the Internet of Things (IoT) uses the interconnectedness of various networks and systems to increase efficiency and supply better data to end users. What are the “things” of IoT? 

They can be anything, such as smart home devices that change temperature and lighting or connected cars that can appropriately gauge maintenance requirements to increase safety or inefficiency. You can even get a toothbrush that connects to an app that monitors oral health and brushing habits. 

While not getting yelled at by the dentist for poor flossing is a major perk, the IoT can provide use cases for many other cutting-edge tech innovations like cloud computing and machine learning.

Blockchain and cryptocurrency

During the COVID-19 pandemic, Bitcoin, Ethereum and other cryptocurrency-adjacent projects like NFTs went parabolic. While some crypto investors are simply concerned with the price of their coins going up in perpetuity, many diehard believers believe in the technology underlying the tokens. Blockchain, the unalterable digital ledger unpinning cryptocurrencies, has many proponents who claim the process of trustless transactions can assist citizens suffering from corrupt monetary or fiscal policy in unstable countries.

Green technology and sustainable investment

Environmental, social and governance (ESG) factors are increasingly becoming a part of investor due diligence. People are less accepting of pollution, deforestation, poor employee treatment, questionable management practices and scandals. Advances in green and renewable tech can help companies limit their environmental footprint, which is good for the planet and increases company appeal to ESG investors.

Augmented and virtual reality (AR/VR)

Video games are always at the forefront of innovation and creativity. Hardcore enthusiasts have been diving into virtual worlds through role-playing games (RPGs) and real-time strategy games for decades, but new tech can bring those worlds to life now. Augmented reality systems allow players to insert themselves directly into the action, using their motion and senses to interact with the game. Unlike the Metaverse, AR/VR is aimed more at individuals and less as a social construct, with examples including the Vision Pro from Apple Inc. NASDAQ: AAPL  and HoloLens from Microsoft Inc. NASDAQ: MSFT.

Robotics and automation

Much like AI, fears of job replacement from automation are legitimate but likely overblown. Robotics can make dangerous jobs safer and improve outcomes in important industries like healthcare. For example, Intuitive Surgical Inc. NASDAQ: ISRG makes automated systems that assist surgeons in making procedures more precise and improving outcomes and recovery time. In many industries, robots can improve speed and efficiency without sacrificing jobs.

Why invest in new technology? 

New tech investments can have multiple purposes. Many investors genuinely believe in the transformative powers of these innovations and want to be on the “right side of history” with their portfolios. While investing for the prosperity of future generations is a nice idea, nobody puts capital into an investment for entirely unselfish reasons. New tech can make a lot of money, and investors in some of the highest-rated tech stocks have been more than fairly compensated.

Even in one of the worst market environments for tech companies (persistent inflation and rising interest rates), the top tech stocks underperformed the S&P 500 by less than 6%. Now consider how the best tech stocks compared to the S&P 500 when market conditions were friendlier. When looking for future technology to invest in, the goal is outperformance, which is why this area attracts so many risk-tolerance investors. 

How to find new technology to invest in 

Wondering how to invest in new technology? While you can’t buy shares of the metaverse or artificial intelligence directly, you can invest in innovative companies seeking to bring new tech advances to the public sphere. Here are a few steps to get started on your journey: 

Step 1: Research trends and innovations in emerging technologies.

Some of these latest trends in new technology have more plausibility than others. While it may be hard to fathom an entire Fortune 500 company holding seminars and meetings in virtual metaverse buildings, it’s easy to imagine AI and robotics simplifying dangerous jobs and increasing the efficiency of repetitive processes. 

Of course, your experience and opinion may vary, so every investor needs to research emerging technologies and choose the innovations that best fit their worldview. For example, if you don’t believe that commercial space travel is a viable business, you won’t look to invest in companies building passenger spacecraft. When looking for new tech to invest in, you’ll choose the areas you think have the best chance of scaling and becoming profitable.

Step 2: Select the types of new technology you wish to invest in.

After researching the trends in new tech, you’ll need to choose the innovations to invest in. Which types of emerging tech have the most potential? You may think all the types of new tech listed here have future viability, or you’re only interested in cloud computing or cybersecurity. A simple pros and cons list for every kind of new tech is often a good way to establish a foundation. As famed money manager Peter Lynch once said, “Invest in what you know.”

Step 3: Find public companies working on these new tech areas.

After choosing the tech with the most potential, you’ll need to find public companies working to develop these features. No shortage of options here! Thematic ETFs are an excellent place to start, where you can buy bundles of tech companies in a single security. An ETF like the iShares U.S. Technology ETF NYSE: IYW offers exposure to a broad sample of large-cap tech companies, while funds like the Global X Robotics and Artificial Intelligence ETF NASDAQ: BOTZ focus on a specific tech theme.

If you want to pick tech stocks yourself, you’ll have to consider large and small companies, domestic or international. If your focus is AI and robotics, you can invest in juggernauts like NVIDIA Corp. NASDAQ: NVDA and Microsoft Corp. NASDAQ: MSFT or smaller companies like iRobot Corp. NASDAQ: IRBT and C3.ai Inc. NYSE: AI.

Step 4: Perform due diligence on company stocks.

Now that you have a list of companies operating in your preferred emerging tech areas, you must research them diligently. Tech isn’t a sector for investors with weak stomachs; blistering highs mixed with plummeting prices is something any investor in this sector will experience with enough time. MarketBeat has plenty of tools to help with your stock research, such as the dividend screener or the conference call transcript calendar.

The more tools you utilize, the better you’ll understand the strengths and weaknesses of these companies. To find the best new technology companies to invest in, you’ll need to dig deep into balance sheets, conference calls and analyst projections.

Step 5: Buy shares and monitor your investments.

Tech risk is well known, so you’ll need to keep a close eye on your investments, especially if you’re buying individual stocks in a sector as volatile as this one. Set clear goals and limits for your investments so you can buy and sell more dispassionately. It’s easy to get caught up in the hype and try to catch falling knives when investing in new tech. Stick to your plan, and don’t let emotions get the best of you.

Risks and mitigation in tech investments

Tech stocks are considered risky investments because many products and services will fail! The reasons for failure can vary, but the fact is that these companies are entering new and unexplored spaces or going up against entrenched incumbents. Here are a few specific risk factors to consider when looking for new tech investments.

• Scalability: Many ideas for products or services sound great on paper or in a conference room but fail to gain enough public traction for success. New tech firms usually produce a roadmap; investors must ask if the projections are realistic.
• Economic slowdowns: Is it any surprise cash-burning tech stocks were hit hardest as inflation began to skyrocket in 2021? Companies working on new tech often don’t have much in terms of profits and require constant funding from investors and institutions. When economic conditions tighten, this funding might get harder to find.
• Regulatory concerns: The government can always step in and rain on the parade regarding new technology. AI, cryptocurrency and other tech trends often exist at the edges of legislation, and future regulations can be tough to predict.

New tech offers enticing investment trends 

Looking for technology to invest in was a common theme of the low-interest rate era following the Great Recession, but now rates are rising, and inflation remains stubborn. If you’ve been investing for less than a decade, you likely have never seen an environment like this one. Tech stocks have been resilient (especially ones deep into AI and microchips like NVIDIA), but they often require constant capital and borrowing money isn’t as easy as it used to be. Real winners may take a few years to emerge for these new segments.

FAQs

Here are a few frequently asked questions about investing in new technology:

What is the best technology to invest in?

The answer depends on which tech trends you think hold the most promise; you can’t guarantee anything. Remember, many serious investors didn’t believe the internet would be profitable, let alone lead to large-scale global change.

What new technology stocks can you buy?

You can invest in companies focused on specific areas like AI or cybersecurity or buy tech-themed ETFs covering broad or slim market sections.

What are some new and emerging technologies?

New trends in emerging tech include AI and robotics, cloud computing, cybersecurity, the metaverse, the Internet of Things and space travel and exploration.

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