Covid-19 fuels e-commerce, cloud and other tech trends: UBS

Be it in Ed-Tech or cybersecurity, tech investors should seek avenues to capitalize on the economy’s structural changes, according to UBS.

The global pandemic has triggered an acceleration of technology trends, ranging from e-commerce and cloud computing growth to the adoption of blockchain and Artificial Intelligence, according to a new UBS report.

Those trends are driven by global digital transformation, propelled by rising Internet penetration and exponential growth in data, according to the bank’s report, titled The Future of Tech Economy. Be it in Ed-Tech or cybersecurity, tech investors should seek avenues to capitalize on the economy’s structural changes, according to UBS.

UBS expects 2 billion additional Internet users to materialize within the next decade, with the majority coming from emerging markets, the UBS report said. The investment bank expects global Internet penetration will increase in tandem with those new users.

Modern society has blurred the lines between the physical world and the digital one, creating the so-called “tech economy,” UBS said in the report. This dynamic enables people “to do more with less” and positions companies that are able to rapidly implement tech to potentially outperform the economy, the report said.

For example, covid-19 has accelerated e-commerce and digital data penetration as customers have found comfort in online shopping amidst the closure of physical stores.

To capitalize on e-commerce adoption, UBS suggests investors seek exposure to big platforms and key enabling technologies like mobile, cloud, big data and social, as well as emerging tech like blockchain and AI.

The investment bank also acknowledged the changes in the workspace culture along with societal expectations of what that workspace environment needs to be.

The “golden era” of the flexible workspace industry is largely behind us due to oversupply and longer-term trends like telecommuting, the report noted.

Data centers, on the other hand, are expanding rapidly to cope with increasing demand for cloud applications, according to the report.

UBS expects investment in data centers to continue growing by double-digit rates in the coming years.

The focus on developing services sectors is putting more focus on education. EdTech is becoming a global phenomenon, as it could offer greater personalization, engagement, flexibility, efficiency and productivity. Automation and robotics are also changing the way we work, propelling the EdTech trend forward.

UBS estimated global education spending will reach $6 trillion in the next decade, of which a sizable portion could be allocated to EdTech.

The bank recommended investing in automation and robotics as a means to directly seek exposure to education services and EdTech companies.

Elsewhere, UBS expects cybersecurity will emerge as a dominating technology theme.

Global cybersecurity incidents are rising by 20 percent to 30 percent annually. Security is no longer merely a concern of IT managers, but a key boardroom topic, the report said.

Investment in cybersecurity should remain robust in the years ahead, growing at a high single digits rate over the next few years, UBS said.

Action Item: View UBS’s full report here.