How to Invest in Technology (Updated 2023)

What should investors know about the tech market?

The past decade or so has seen the evolution of countless tech-related industries.

Take, for example, the cable industry, which has been transformed by video streaming. As of Q4 2022, Netflix (NASDAQ:NFLX) had expanded to over 190 countries worldwide with a subscriber base of 231 million. The streaming service giant generated US$31.6 billion revenue in 2022, a 6.7 percent increase on the previous year. Amazon Prime Video has also exploded in recent years, with over 200 million subscribers and revenues of US$5.16 billion in 2022.

Apple's Apple TV Plus and Disney's (NYSE:DIS) Disney Plus have joined the ranks of video-streaming service companies as well. While Apple has withheld the number of users it has garnered since launching in 2019, Disney Plus, which debuted the same year, had amassed more than 164 million subscribers as of December 2022.

Gaming is another industry benefiting from advancements in streaming technology. The mobile gaming market is growing faster than any other gaming segment in the world, according to market intelligence firm Newzoo, which estimates that the segment brought in US$184.4 billion in 2022, equivalent to about half of global gaming revenue. In the years ahead, growth in global smartphone sales, cloud gaming, 5G and mobile infrastructure are expected to sustain growth in the mobile gaming sector.

The "fourth industrial revolution" has been tied to various disruptive technologies, including artificial intelligence (AI), 3D printing, and blockchain. The global AI market was worth US$136.55 billion in 2022, according to a Grand View Research report, with research and innovation spurring activity in verticals like the automotive, healthcare and finance industries. These segments are adopting solutions like machine learning, robotics, neurolinguistic programming and querying methods.

3D printing, valued at US$16.75 billion in 2022, may be a niche market, but it's growing rapidly based on a number of factors including the technology’s variety of benefits, such as mass customization, the production of complex parts and the ability to improve efficiencies in the manufacturing process.

Blockchain has, of course, also garnered interest in the tech sector; the size of the global market hit US$10.02 billion in 2022. Within this tech space, Grand View Research highlights “DeFi as an emerging financial technology based on blockchain, which reduces the control banks have on financial services and money.”

Which tech sectors have the most potential?

When looking at the technology market worldwide, its reach is almost untouchable — the 10 largest tech firms have a massive combined market capitalization of nearly US$10 trillion.

Deloitte posits that the drive by enterprises to embrace digital transformation is pushing the growth of emerging technologies such as cloud computing. “Growth opportunities abound for tech companies that execute on all forms of digital transformation, particularly in the areas of cloud, XaaS, analytics, robotic process automation, AI, cybersecurity, and edge computing,” Deloitte notes in its technology industry outlook.

With exciting and profound advancements in natural language processing and prediction, AI adoption is beginning to pick up, particularly with the advent of OpenAI's ChatGPT. The evolution of AI is projected to influence and shape society, and analysts estimate that revenues from AI will grow at a CAGR of 37.3 percent to reach more than US$1.81 trillion in 2030.

The mobile gaming market will also see growth in the years ahead, rising at a CAGR of 11.88 percent to reach an estimated US$214.61 billion by 2028. “Traditional console and PC game publishers like Activision Blizzard (NASDAQ:ATVI) and Electronic Arts (NASDAQ:EA) are increasingly focused on mobile gaming due to its popularity with gamers worldwide and lucrative revenue opportunities," states SkyQuest Technology Consulting in a recent report on the industry.

As for the future of 3D printing, Grand View Research projects a CAGR of 23.3 percent, which would create a market worth US$88.28 billion by 2029. According to the firm, that growth will be driven by increasing prototyping applications from industries like healthcare, aerospace and defense, as well as "aggressive research and development" on 3D printing.

Blockchain is another of the most promising sectors in the future of the tech space. Grand View Research is forecasting a CAGR of 87.7 percent between 2022 and 2030 to reach a market value of more than US$1.43 trillion. Blockchain's use for the healthcare sector is expected to experience the fastest growth during the period mentioned, driven by the demand for digitization in the industry and an increasing number of regulations aimed at protecting patient data.

How to invest in the tech industry?

Within the broad scope and magnitude of the tech industry, there are countless ways investors can gain exposure to transformative and disruptive technologies.

Exchange-traded funds (ETFs) provide exposure to a basket of securities and are a popular and often inexpensive method for investing. Here’s a brief overview of a few technology ETFs for consideration:

• iShares US Technology ETF (ARCA:IYW): This ETF began on November 12, 2001, and has 142 holdings. It covers big tech names such as Microsoft (NASDAQ:MSFT), Apple, Meta Platforms and Alphabet.

• Technology Select Sector SPDR (ARCA:XLK): This fund has 78 holdings and was started on December 16, 1998. It also holds major names, including Visa (NYSE:V), Mastercard (NYSE:MA) and Cisco (NASDAQ:CSCO), along with Apple, Microsoft and Alphabet.

• iShares Global Tech ETF (ARCA:IXN): Unlike the iShares US Technology ETF, this iShares fund focuses on technology companies from around the world. Founded in 2001, it provides exposure to Japan, Korea, Taiwan and Germany, but also offers a percentage of exposure to US companies. Its international holdings include Samsung Electronics (KRX:005930) and Taiwan Semiconductor Manufacturing Company (NYSE:TSM,TPE:2330).

More advanced investors or those willing to do their research may want to look at stocks in the tech space. Large-cap technology stocks are a good place to start, but it's possible to get specific as well — AI, robotics, esports, virtual reality and blockchain are just a few niche sectors those interested in tech may want to look into.