5 Mega Investment Trends To 2025 And The Main Players

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by: Matt Bohlsen
Summary

A brief review of what other researchers see as mega trends to 2025.

My five mega investment trends to 2025.

The top five global players in each category.

This article first appeared on Trend Investing on March 14, 2019; therefore all data is as of that date.

With 2025 just a little over five years away, I decided to give a brief outline of what looks to be the biggest ("mega") trends ahead to 2025. Added to that in each trend (or sub-trend) I have added in the top five main companies that dominate the sector. Chances are quite high these companies can do very well in the next five years as the trends gain further momentum. To keep the article brief I have not gone into depth on each trend, but rather listed some articles at the end of each section for further reading.

A brief review of what other researchers see as mega trends to 2025

Ark-Invest's top five disruptive technologies trends are Artificial Intelligence, Energy Storage, Robotics, Genome Sequencing, and Blockchain Technology.

Ark-Invest's top 5 disruptive technologies

Source

Frost and Sullivan's five mega trends were - Connectivity and Convergence (more online, connected living, sensory tracking, data analytics, virtual currency), Bricks and Clicks (online shopping and e-commerce), smart is the new green (smart cities), future of energy (energy harvesting, solar, energy management), future of mobility (rise of electric mobility, connected cars, ride sharing).

My 5 mega investment trends to 2025

1) Electric Vehicles [EVs], Energy Storage, Battery manufacturers and EV metal miners to rise fast

My model is forecasting electric car sales to move from 2.2% market share (~2.1 m sales) as of end 2018, to 20% by end 2025, for a 9x increase in just seven years. Bloomberg forecasts 11% by 2025 for a 5x increase. Electric car sales grew ~72% in 2018. As we head to 2025 electrification will spread throughout the transport sector - e-bikes, e-scooters, e-cars, e-trikes, e-jeepneys, e-trucks, e-buses, e-semis, e-trains, e-ships, and some e-planes.

Energy storage also is forecast to grow strongly. It will involve home, office, and commercial mostly using lithium-ion batteries, and for large scale utility vanadium redox flow batteries (VRFBs).

Bloomberg's forecast annual electric vehicle sales showing market share - 11% by 2025, 28% by 2030, 43% by 2035, 55% by 2040

Note in the chart below Bloomberg is expecting Battery Electric Vehicles (BEVs) to grow by far the most, and I would agree with that.

Source: Bloomberg research

Investors can play this boom several ways:

  1. Buy the EV companies - The top 5 in 2018 in order of sales were Tesla (TSLA), BYD Co. [HK:1211] (OTCPK:BYDDY) (OTCPK:BYDDF), Beijing Automotive Group Co. (BAIC) [HK:1958] (OTC:BCCMY), BMW (OTCPK:BMWYY), and Nissan (OTCPK:NSANY).
  2. Buy some energy storage companies (can include battery manufacturers, lithium and vanadium miners). See below.
  3. Li-ion battery manufacturers - The top 5 in 2018 were LG Chem [KS:051910] (OTCPK:LGCLF), Contemporary Amperex Technology Co Ltd (CATL)[ SHE:300750], BYD Co, Panasonic [TSE:6752] (OTCPK:PCRFY), and Tesla.
  4. The EV metal miners:
  • Lithium - Albemarle (NYSE:ALB), Jiangxi Ganfeng Lithium [SHE: 2460] [HK:1772], Sociedad Quimica y Minera S.A. (NYSE:SQM), Tianqi Lithium Industries Inc. [SHE:002466], Livent Corp. (LTHM)[GR:8LV]. Note Pilbara Minerals [ASX:PLS] (OTCPK:PILBF) may soon replace Livent in the top 5.
  • Cobalt - Glencore [HK:805] [LSE:GLEN] (OTCPK:GLCNF), China Molybdenum [HKSE:3993] [SHE:603993] (OTC:CMCLF), Katanga Mining [TSX:KAT] [GR:31Z] (OTCPK:KATFF), Umicore SA [Brussels:UMI] (OTCPK:UMICY), Cobalt 27 [TSXV:KBLT].
  • Rare Earths - Dominated by China with the exception of Lynas Corporation [ASX:LYC] (OTCPK:LYSCF).
  • Graphite - Syrah Resources [ASX:SYR] (OTCPK:SYAAF).
  • Nickel - Vale SA [BZ: VALE3](NYSE:VALE), Norilsk Nickel (LSX:MNOD) (OTCPK:NILSY), Jinchuan International Group Resources Co. Ltd [HK:2362], Glencore (OTCPK:GLCNF)[LSX:GLEN], BHP Group [ASX:BHP](NYSE:BHP).

5) Vanadium miners (steel industry and commercial scale energy storage) - Largo Resources [TSX:LGO] [GR:LR81] (OTCQX:LGORF), Bushveld Minerals Limited [LN- AIM:BMN] (OTC:BSHVF), AMG Advanced Metallurgical Group NV [AMS:AMG] (OTCPK:AMVMF), Australian Vanadium [ASX:AVL] [GR:JT71] (OTC:ATVVF), Technology Metals Australia [ASX:TMT].

The impact on demand for the various EV metals in a 100% EV world

Source: Visual Capitalist courtesy of UBS

Note: The above graph was based on the Chevy Bolt teardown. Future e-cars are more likely to have more nickel and less cobalt.

Tesla Model 3 - The clear global leader in electric car models in 2018

Source

2) The Internet grows bigger - Online shopping/entertainment/transactions (e-commerce and the blockchain)/ Social media

The graphs below show just how huge the Internet is and it's still growing. Growth in developed countries (80.9% penetration) will slow, and developing countries (45.3% penetration) will grow faster as they play catch up. Not only will global internet users continue to rise, monetization from the internet will increase further. The introduction of 5G should also assist.

Global internet penetration rates is at 51.2% by end 2018

Total global internet users is at 3.896 billion as of end 2018

Online shopping

Global e-commerce sales grew 18% in 2018 to $2.86 trillion, out of a total global retail sales market of $18.84 trillion, achieving 15.2% market share. E-commerce is still in the early stages globally with penetration rates growing about 2% per year. So by end 2025 we can estimate we may reach about 30% market share if the same growth rate continues. Certainly emerging Asia has a large catch up potential.

E-commerce still has huge growth especially in rapidly growing Asia (chart is a bit out of date now)

Source

Depending on how you measure it the top five global leaders in online shopping are Amazon (AMZN), JD.com (JD), Alibaba (BABA), eBay (EBAY), and Japan's Rakuten (OTCPK:RKUNF). Next comes Brazil's B2W Companhia Digital (OTC:BZWHF), Germany's Zalando (OTCPK:ZLNDY), and Groupon (GRPN).

The most popular online retail sites in emerging Asia are Lazarda (SE Asia) (owned by Alibaba), Tokopedia (Indonesia) (Softbank owns a sizeable share, as does Alibaba), Flipkart (No 1 in India) (Walmart owns 77%, Tencent owns ~6%), Amazon India, Shopee (SE Asia, No 1 in Indonesia) (Sea Group, Tencent ~40%).

The chart below is a bit out of date now, but it shows the potential growth ahead in ASEAN with Indonesia to dominate. Obviously India also will be an even bigger market due to its 1.35b population.

ASEAN e-commerce market growth forecast to 2025 (India is not in ASEAN)

Source

Online entertainment (gaming, e-sports)

Most gaming revenue comes from China (USD 22.8b), USA (17.4b), and Japan (USD 11.4b). The chart below shows mobile games revenue is by far the largest followed by downloaded and online games.

Global gaming revenue was USD 77.3 billion in 2018

https://1wcm0741r5ad1d1r7j17fvxq-wpengine.netdna-ssl.com/wp-content/uploads/2019/03/Global-gaming-revenue-was-USD-77.3-billion-in-2018.png

Source: Statista

Key players in the total games market include Microsoft (MSFT), Tencent, Activision Blizzard (ATVI), Sony (SNE), Apple (AAPL), and Electronic Arts (EA). E-sports (a competition/tournament using an online game) is a rapidly growing sector. The top five are Activision Blizzard, Epic Games (Tencent owns 40%), Sony Nintendo, Riot Games, and Valve. You can read about the top 10 e-sports companies here.

Online transactions (online banking may be the next disruption)

The chart below shows that digital commerce is forecast to continue to grow strongly through to 2023. China, US, and Japan are leading the way.

Mobile Point of Sale payments to drive digital commerce growth to 2023

Source: Statista

The chart below highlights that China leads at mobile payments with Tencent's WeChat Pay and Alibaba's Alipay dominating. Paypal (PYPL) and Apple Pay rank third and fourth. Samsung, Amazon (AMZN), and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) (Android Pay) and hundreds of smaller Fintech companies are involved is this lucrative area. Not to mention Visa (V) and Mastercard (MA).

Global mobile payment platforms (by user numbers) 2017

Source: Statista

Social media

Social media globally adds ~11 new users every second, and as shown in the graph below is used by 42% of the global population, or 3.196 billion people.

The top 5 social media companies based on monthly average users [MAUs] are:

  • Facebook (FB) - 2.2b MAUs
  • You Tube - (Alphabet Google - 1.9b MAUs
  • WhatsApp (Facebook owned) - 1.5b MAUs
  • Messenger (Facebook owned) - 1.3b MAUs
  • WeChat (Tencent [HK:700] (OTCPK:TCEHY)) - 1.06b MAUs

Note: Instagram (Facebook owned) ranks 6th with 1b MAUs, and QQ (Tencent owned) ranks 7th with 861m users. China's Tik Tok (owned by ByteDance - may IPO soon) is growing very fast, gaining 0.5b MAUs in just 2 years. You can read about the global top 21 social media sites here.

Research shows global internet penetration at 53%, social media dominates

Source

Blockchain

The blockchain is continuing to gain in popularity despite the ups and downs of the cryptocurrencies. Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract functionality. It is considered a leader in blockchain.

3) Artificial Intelligence to grow rapidly (Machine Learning, Cloud computing, Facial recognition)

Artificial Intelligencewill most likely be the biggest trend in the tech world since the internet. It will come in many ways often without us knowing. Some examples are web search, social media algorithms, call center automation services, online chat bots answering our questions, machines that can learn and respond, facial recognition and security surveillance, fraud detection, personal assistants, autonomous vehicles (AVs), airplane autopilot, and so on.

The artificial intelligence market is projected to hit $90 billion by 2025 - That is a 28 fold increase on 2016

artificial intelligence future timeline technology 2025

Source

There are literally hundreds of AI companies but my top 5 are Apple, Samsung Electronics (OTC:SSNLF), Alphabet Google, Facebook, and Nvidia (NVDA) due to their current dominant position in the sector. The Technavio article linked below lists their top ten AI stocks as Amazon (AMZN) (Amazon Web services), IBM (IBM), Siemens (OTCPK:SIEGY), Google AI, Omron Adept Technologies (OTCPK:OMRNY), AlBrain (private), Apple, Facebook, Microsoft (MSFT), and Anki (private). I would also add in Japan's Softbank (OTCPK:SFTBF) who via their Vision Fund are leaders in AI, and ride sharing.

Artificial Intelligence [AI] may be the hottest tech trend from now to 2025

Source

Cloud computing

Cloud computing has 3 key areas - Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). My article linked below explains further, and looks at some relatively smaller listed cloud computing companies.

Facial recognition

In facial recognition China is leading the way using surveillance technology to discipline its citizens, and plans to have 300 million cameras monitoring its citizens by 2020. Facebook of course use facial recognition to help you tag a post.

SenseTime (private) is a global leader in facial recognition. SenseTime partners include Qualcomm (QCOM), Nvidia (NVDA) and smartphone makers Xiaomi, Huawei, Oppo, and Vivo. For the past three years the average revenue growth has been 400%. SenseTime is backed by CDH Investments (private), Qulacomm, Dalian Wanda, and Alibaba (BABA). You can read more here.

SenseTime - The World’s Most Valuable AI Startup

Image result for sense time facial recognition pic

Source

4) 5G, The Internet of Things (IoTs), Robotics, Interactive digital signage (for selling, data collection and security).

5G

5G ("5th generation wireless Internet") will be a huge boost to the Internet phasing in to global cities starting 2019, with ~1 billion people worldwide likely to be 5G-enabled within five years from now. 5G will be at least 10x faster than 4G and allow you to be online wherever you are, which should mean portable devices will increase further in popularity. 5G will facilitate massive growth in video streaming and in the Internet of Things wherein almost everything will be connected and communicating. Data flow will massively increase, as will the need for data storage (including cloud data storage).

My top seven 5G stocks are Nokia (NOK), Ericsson (ERIC), Qualcomm (QCOM), Skyworks Solutions (SWKS), Apple, Samsung Electronics, and Netflix (NFLX).

The Internet of Things (IoTs)

The IoTs is set to grow rapidly helped along by 5G. It will be seen in the home, the office, and in industry. For the IoTs my top pick is Skyworks Solutions.

Robotics

In the robots space I like two ETFs that I currently own - Global Robotics and Automation Index ETF (ROBO) and Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ). The sector has been a bit slow to take off, so for now I am investing cautiously.

Interactive digital signage (for selling, data collection, and security)

Digital signage can now work much like how Facebook works on your phone, but in this case in real life with an interactive signage display. The AI not only involves facial recognition but also data analytics using cloud computing. Customers can interact with a touch screen, the display can collect data (body counts, gender, age, emotion) by using sophisticated facial and object recognition software. For security purposes the signage can detect weapons or persons of interest. I expect public arenas, airports, train/bus stations, shopping centers, and work places will adopt facial recognition software to help them identify any potential or actual threats.

I plan to write soon an article on interactive digital signage and the main companies involved. A smaller company I have been studying recently is VSBLTY [CSE:VSBY] [GR:5VS] as it looks to have potential.

Interactive digital signage - Retail selling/interaction, data collection (feedback for brands), security

Image result for interactive digital signage

Source

5) Demographic changes - Rise of the Asian middle class, baby boomers retiring

Rise of the Asian middle class

The Asian middle class is rising from 600 million in 2015 on its way to 3 billion by 2030. To get a feel for this massive growth, it works out to around 438,000 new entrants a day to the middle class — every day.

The difficult part here is that many of the new middle class will not really have much spending power for some time due to the low wages in much of Asia. China has been the exception until now, so that should mean investors need to focus on Chinese middle class stocks. India should be next to surge.

Leading Chinese middle class stocks to consider are the online giants Baidu (BIDU), Alibaba (BABA) and Tencent. I'm avoiding the banks and property sector due to China having 65 million vacant apartments.

Some good ETFs to consider are iShares MSCI Emerging Markets Asia ETF (NASDAQ:EEMA) and EGShares Emerging Markets Consumer (NYSEARCA:ECON).

Baby boomers retiring

The baby boomers (born shortly after WW2) are now starting to retire. This leads to several investment opportunities such as travel/cruise ship companies (Carnival (CUK) etc), online travel companies (Expedia (EXPE), Booking Holdings (BKNG), China's Ctrip (CTRP)), and retirement services (retirement villages, home care, etc.). I plan to write an article soon on how to invest in the baby boomer retirement trend.

Other key rising trends

  • Urbanization - The rise of even more mega cities to rival Delhi, Tokyo, and Shanghai.
  • Infrastructure boom (especially in emerging Asia, led by China's Belt and Road").
  • The Next 11 countries to rise (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea, and Vietnam) as BRICs (Brazil, Russia, India, China) economies GDP growth slows. Other South American countries (Argentina, etc.), Eastern European countries (Poland, etc.) also will rise, along with a few African nations. Certainly Vietnam and Indonesia are doing very well in recent times.
  • The rise of popularism as a result of global inequality and government failures. Hopefully this will see a move against the severe global corruption problems we now face.

Risks

  • A trend may not occur, or may disappoint.
  • Disruptive changes can occur, disrupting an entire sector or industry. Most of the trends I discussed are disrupting other sectors, but they can also be disrupted one day by better ideas.
  • Management and currency risks.
  • The usual stock market risks - Sentiment, dilution, liquidity.

Further reading

Conclusion

My top five mega investment trends to 2025 are:

  1. Electric Vehicles (EVs), energy storage, battery manufacturers and EV metal miners to rise fast.
  2. The Internet grows bigger - Online shopping/entertainment/transactions (e-commerce and the blockchain)/ Social media.
  3. Artificial Intelligence to grow rapidly (Machine Learning, Cloud computing, Facial recognition).
  4. 5G, The Internet of Things (IoTs), Robotics, Interactive digital signage (for selling, data collection and security).
  5. Demographic changes - Rise of the Asian middle class, Baby boomers retiring.

These trends are all highly likely to be very strong ("mega") trends, but will take some time to fully play out. For investors looking at high growth long term investments all my five mega trends should be good places to consider investing, remembering to diversify and control risk.

As usual all comments are welcome.

Disclosure: I am/we are long ALPHABET GOOGLE C (GOOG) , FACEBOOK (FB) , SAMSUNG ELECTRONICS (XLON:SMSN), NVIDIA (NASDAQ:NVDA), ALIBABA (BABA), BAIDU (BIDU), TENCENT (THECY), BYD CO (1211:HK) , ALBEMARLE (NYSE:ALB), JIANGXI GANFENG LITHIUM [SHE: 2460] , JIANGXI GANFENG LITHIUM [HK: 1772] , SQM (SQM), PILBARA MINERALS [ASX:PLS], COBALT27 [TSXV:KBLT] , KATANGA MINING [TSX:KAT], SYRAH RESOURCES [ASX:SYR], MMC NORILSK NICKEL [LSX:MNOD], GLENCORE [LSX:GLEN], LYNAS CORPORATION [ASX:LYC], LARGO RESOURCES [TSX:LGO], AMG ADVANCED METALLURGICAL GROUP NV [AMS:AMG] , AUSTRALIAN VANADIUM [ASX:AVL] [GR:JT71] (OTC:ATVVF), TECHNOLOGY METALS AUSTRALIA [ASX:TMT], GLOBAL ROBOTICS AND AUTOMATION INDEX ETF (ROBO), GLOBAL X ROBOTICS & ARTIFICIAL INTELLIGENCE THEMATIC ETF (BOTZ). I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advice.