Why Invest in Nanotech Stocks?

What is nanotech?

Nanotechnology is the manipulation of matter on a nanoscale — to put that into context, a nanometer is one-billionth of a meter, or approximately one-90,000th the width of a single human hair.

This micro-scale industry has the potential to produce macro returns for savvy investors. Nanotech has been lauded as the "next industrial revolution," and research and development into nanotechnology applications has major implications for almost every industry. According to Precedence Research, the global nanotechnology market is projected to reach US$288.71 billion by 2030.

What is the outlook for nanotech?

Back in 2006, Lux Research estimated that revenue from products using nanotechnology would reach US$2.6 trillion by 2014 (a staggering increase from the US$14 billion that nanotech produced in 2004).

Optimistic market predictions like that one spurred a flurry of nano-investing activity, including the launch of the PowerShares Lux Nanotech Portfolio, an US$89 million exchange-traded fund created by Lux Research and PowerShares Capital Management.

Ultimately, the PowerShares Lux Nanotech Portfolio didn’t live up to its initial promise. Despite predictions at the peak of the mid-2000s nanotechnology investing bubble, nanotech stocks didn’t achieve the rate of growth that investors had hoped for — after primarily incurring losses after its inception, the fund was liquidated in February 2014.

However, this news isn’t all bad. What has emerged out of a boom-and-bust market is an industry focused on strategic long-term business plans and in-demand innovative products. Many firms get steady revenue from nanotech products, which they reinvest in the market to drive innovation. For example, nanotech giant 3M (NYSE:MMM) uses nanotechnology in products destined for the dental, electronics, architecture and energy markets. Some of its core nanotech products include its Filtek series.

With an anticipated compound annual growth rate of around 14.5 percent between 2022 and 2030, the nanotech market still appears to be a promising investment. Although the dramatic anticipated growth rates of the mid-2000s are a thing of the past, what remains is a solid market that consistently produces exciting, far-reaching and potentially transformative products.