Areas of opportunity: The cloud and semiconductors
Of the many promising technologies getting lots of attention in tech, Christopher says two are especially promising: cloud technology and the specialized semiconductors used in cars and manufacturing.
Cloud technology refers to using remote servers to store information instead of the hard drive of a desktop computer or a corporate server down the hall.
“Cloud businesses represent a generational shift in the industry,” Christopher says. “We’re likely in the early years of a multi-decade migration to the cloud,” which means companies within this industry may be worth a closer look.
Semiconductors—microscopic electrical circuits etched onto microchips that power computers and other devices—are another favorable area, Christopher says. These electronics are becoming more prevalent in consumer goods—in everything from self-driving car technology to infotainment systems—as well as in industrial equipment such as the microchips used in robots and other devices central to factory automation. Because of this, Christopher believes companies manufacturing microchips for these uses are well-positioned.
Christopher notes that companies involved in specialized semiconductors are best positioned to grow. “Manufacturers of commoditized chips may not be as much of a draw,” he says. “It’s the makers of specialized, cutting-edge ones that are likely more attractive for investors.” With that in mind, semiconductor companies making chips primarily for mobile consumer devices, for example, may not experience the same growth given the maturity of the smartphone market.
Trade disruptions can be a risk
As a whole, Christopher says, the technology sector tends to follow the broad ups and downs of the overall economy. It may also be vulnerable to trade disruptions in the Asia Pacific region, where many semiconductor plants are located.
“Any break in trade relations amongst those countries could impact the sector,” he says.
*S&P 500 Forecasts: FactSet, June 2018