4 tech investing trends to watch in 2023

From a price and valuation perspective, it’s been a tough year for tech stocks. Even blue chip names such as Microsoft, Apple and NVIDIA have faced significant price corrections in financial markets. At one point in mid-October, Morningstar’s U.S. technology sector index was down more than a third from the start of the year. Even after a slight rebound, it remained a quarter lower in early November.

However, technology companies continue to show good levels of growth as the world becomes more and more digital. Additionally, many tech companies have resilient characteristics, meaning they remain attractive to investors.

>Read also: Five venture capital trends for start-ups to follow in 2022

There are good reasons to be optimistic about the future of technology. For starters, there have been several years of strong growth – and not just among the giants. Last year was the best ever for the UK tech industry in terms of investment, with the sector securing £29.4 billion in funding. As the Department for Digital, Culture, Media and Sport summed it up: “More venture capital investment, more unicorns, more jobs and more future.”

Perhaps more importantly, as businesses face a challenging environment, they will rely more than ever on technology to deliver the efficiencies and opportunities needed to survive and even thrive in a tougher climate. This should ensure that certain niches in the tech ecosystem will continue to grow.

> See also: Why now is a good time to invest in UK start-ups if you are a dollar investor

Four technology investment trends in particular stand out.

#1 – AI and machine learning

In an inflationary market, many companies will seek to increase their efficiency. This will lead to a continued and growing demand for AI, machine learning and the automation that comes with it. Reducing reliance on human resources and increasing efficiency will always be popular as labor and other costs rise, but what we’re seeing now are applications that go way beyond that. simple streamlining of processes.

For example, Mobysoft, an ECI investment, uses predictive analytics to help social housing providers keep their tenants in well-maintained units, while improving rent collection and reducing arrears.

AI can also help generate new business. CPOMS, a former ECI investment, is a good example. It used ALTERYX analytics software to create a new business identification model, prioritizing potential customers by analyzing the most common characteristics of its existing user base. These tools will be invaluable for businesses looking to generate new revenue.

#2 – Cloud

The cloud also offers companies a significant opportunity to reduce costs and develop new functionalities. Public cloud hosting allows companies to scale operations up or down quickly without incurring large capital expenditures, which can be useful either for investing additional cash in growth initiatives or for taking action. defensive in several scenarios. The old financial adage that “cash is king” remains as true today as it ever has.

Additionally, the range of cloud services and tools offered by hyperscalers is expanding. For example, Microsoft launched an IoT Hub in its Azure platform, which allows companies to build custom solutions for complex scenarios to facilitate IoT use cases. This will likely become even more useful as the range of potential IoT applications expands with the rollout of 5G spectrum and the growing prevalence of low-power IoT networks.

Fundamentally, public cloud platforms provide businesses with the ability to more tightly control their fixed costs, both in terms of technology, internal computing capacity, and floor space that historically may have been used to house on-site infrastructure. This ability point will be especially valuable in a time when these skills are expensive and rare.

#3 – Simplify Coding

“Learn to code” was once the default advice for employees affected by layoff or those who found themselves in a declining industry. More recently, it has become an in-demand skill as SaaS and software have become more prevalent. However, while historically it was imperative for a developer to learn one or even several distinct coding languages, the growing development of low-code platforms should increasingly democratize and simplify the creation of products and software. applications by non-technical people. learn a language.

This trend will allow more companies to produce software and bring products to market faster by simplifying development. It may also help address developer shortages given the current war for talent in this space.

#4 – Stay Safe

Finally, cybersecurity will certainly remain a priority for companies and individuals, regardless of the performance of the economy, especially given the growing number of malicious individual or state actors. Notably, there have been massive global increases in the use of ransomware to extract capital from affected companies. There are even guides on how to launch ransomware attacks on the dark web, so this is an increasingly important and unfortunately frequent problem that companies have to deal with.

High profile attacks tend to grab the headlines. The most recent is a serious attack on Uber in September 2022, which was launched by a hacker who manipulated an employee into sharing his password through a remote access portal on his cell phone. Thanks to this small mistake, the hacker was able to access the company’s critical infrastructure. However, it is not just large companies that are at risk. The threat is ubiquitous with attackers targeting businesses of all sizes and sometimes for relatively small sums of money.

Faced with the increasing frequency of cyberattacks, it is imperative that companies protect their digital assets, intellectual property and customer data. This creates a beneficial backdrop for cybersecurity companies to grow and create shareholder value.

Companies should continue to invest in these areas to ensure they are best positioned for the future. Technology and technology service providers in these areas are likely to thrive, with strong prospects for growth and valuation.

Daniel Bailey is Chief Investment Officer at ECI Partners

Further reading

Who are the UK’s next unicorns?