The knock-on effects from the disruptive forces reshaping the world around us are creating increasingly attractive opportunities for corporates and, in turn, investors.
As new technology, resource scarcity and fragmentation in society each drive changes in behaviours and demand, the race is on to identify the specific sectors and industries most likely to benefit from these evolving themes.
Such trends will present different opportunities for those best situated to respond, said Virginie Maisonneuve, global chief investment officer for equity at Allianz Global Investors (AllianzGI), emphasising the need for agility.
“Indeed, for corporates, an agile approach will be necessary to navigate this time, marked by rapid change and a new ‘Digital Darwinism’ – a race for dominance that will more sharply separate the winners and losers and create new opportunities for investors,” she explained.
Investors, too, must be agile, to “think differently about where growth can be found in this new and exciting era”, added Maisonneuve.
Adapting to new tech
When it comes to technology innovation, although artificial intelligence (AI) is focused for now on software providers and other facilitators, Maisonneuve believes the consequences of this new frontier will be felt across the tech sector and beyond.
For instance, she explained, AI is already driving development in the semiconductor space and will keep on doing so as hardware requirements continue to grow.
Yet the disruptive potential of AI will be most keenly felt outside the tech sector, she added. This will come in terms of the transformation of business practices and consumer experiences, but also with respect to shifting the landscape for investors. “Customer service, healthcare, education and finance are all areas likely to be revolutionised and AI is already making impressions in some of these fields.”
As a result, it is key for corporates in all sectors affected by the coming AI revolution to evolve their mindsets and be agile in leveraging new and changing tech, and adapt to new ways of working, Maisonneuve said.
Reaping returns from resources
Energy scarcity is another key theme that offers new opportunities, especially as supply issues in gas and electricity markets amid recent geopolitical events have accelerated the shift to renewables.
“We are currently seeing an explosion in capital investment in the renewables sector,” said Maisonneuve, “something that is driving demand for various commodities, including rare earths, and will surely further increase the potential for geopolitical tension over access to resources.”
Water treatment and supply is also experiencing disruptive change. In addition to the need for public and private investment, Maisonneuve points to a range of new technologies and approaches to reduce waste and make water storage, treatment and delivery more efficient.
“As climate change threatens to make previously thriving areas uninhabitable, the imperative to develop more innovative water solutions will grow,” she added.
Focus on fragmentation
The broad impact of fragmentation across economies and politics also offers significant and wide-ranging scope for companies and investors to tap new sources of alpha.
For example, said Maisonneuve, heightened fears of escalating geopolitical tension around the world has led many corporates to try to ensure there are robust supply chains, with many national governments also taking measures to protect strategic industries and resources.
“The collective effects of this fragmentation along geopolitical lines are likely to be mirrored in economic terms as the major powers vie for advantage and supremacy in critical areas such as semiconductors and data,” she explained.
If China’s tech offering begins to rival that in the US, for example, “tech hemispheres” might emerge as the largest geopolitical players encourage smaller nations to adopt their systems and standards.
At the same time, global challenges such as climate change require collaborative solutions, said Maisonneuve.
“This wave of fragmentation may require new ways of investing that, for example, capture opportunity by theme rather than being hemmed in by traditional benchmarks,” she added.
