10 Technology Stocks Poised for Future Growth
Economic growth can really come from only 2 sources: a larger pool of workers and/or resources, or a more efficient use of the available resources. With limited natural resources and declining demography, the first source of growth is increasingly unlikely to play a big role in Western economies, or in China for that matter.
So growth has to come from better use of resources. And a key way to do so is through improved technology. A truck is more powerful than a horse, an excavator than a man with a shovel, and a nuclear power plant is more efficient than burning wood or coal.
More recently, technology has started to improve intellectual professions as well, with the rise of computers, the Internet, smartphones, and software, and increasingly AI.
Any investment strategy that prioritizes “tech” has probably outperformed the broader markets since the 1990s.
The few wise enough investors that held on for decades to stocks of Apple, Amazon or Tesla have likely seen returns in the 10x, 100x, or even 1000x. Today is no different. But the most likely to grow exponentially are stocks that are just at the beginning of their journey, more than the established giants like the FANG stocks.
So in this article, we will explore tech companies still at an earlier stage, with large growth potential, a very long runway, and large+growing markets in which to expand. We will also cover more than purely software stocks, as technological innovation can concern hardware as well.
(This list is by nature subjective and does not constitute investment advice. Stocks have been ranked by market capitalization at the moment of writing this article).
When the US tech giants were breaching multi-trillion dollar thresholds, Chinese tech companies were suffering from a crackdown by the CCP. This created massive uncertainty at the time and crashed the price of the leading companies in the sector.
This also did little to stop Chinese scientific and business accomplishments. And above the fray stands Tencent, THE Chinese tech and software company.
Tencent is an absolute giant in the Chinese and Asian tech industry, with offering covering what is in the West divided between many tech giants like Google (search, video, and email), Facebook (social media), Microsoft (gaming), Amazon (e-readers, streaming) or Paypal (“superapp” WeChat & WePay).
This makes Tencent the #1 in:
This dominant position is illustrated by Tencent's continuous growth in the last 5 years, at a 15% CAGR, despite said crackdown by the regulatory authorities and the pandemic.
Another way for Tencent to keep growing is through aggressive investment abroad. A quarter of its revenues, $17B, was channeled into foreign investments in 2021
Notably in gaming, where the company has invested in Roblox, From Software (Soul franchise), Riot Game (League of Legends), Ubisoft (Assasin's Creed), and Epic Game (Fortnite), as well as partnerships with almost all the large videogame studios in the world.
This investment frenzy also made Tencent a shareholder in most tech companies in Asia, especially in the ASEAN region. Tencent has been a shareholder of no less than 1,200 companies, including EV maker Nio, e-commerce Pindudoduo and SEA.
The sheer reach of Tencent makes it a good proxy for the Chinese and broader Asian tech ecosystem. And while share prices have been hammered by panic over government interference in 2021 and 2022, the company's revenues and cash flow did not seem to notice. So the current price is rather attractive and has room to grow, especially compared to the pricier valuation of its Western rivals.
Intuitive Surgical is a pioneer in robotic surgery, quickly becoming the gold standard of surgical intervention worldwide. The market for robotic surgery was $4.4B in 2022, with an expected growth of 18% CAGR expected until 2030, reaching $18.2B.
Intuitive Surgical‘s Da Vinci robot is still to this day the most powerful, popular, and expensive robotic surgery platform on the market. 1,200 Da Vinci robots have performed a total of 12 million surgeries to date, of which 1.8 million in 2022. The installed base grew 12% year-to-year and the procedures grew 26% year-to-year.
Source: Intuitive Surgical
It also has launched Ion, a bronchoscopy platform for minimally invasive lung biopsy, and a medical data platform, Intuitive Hub.
Source: Intuitive Surgical
Intuitive revenues have grown 12% CAGR since 2018. A strong driver is how already equipped hospitals keep reinvesting, with a growing number of hospitals with more than 7 systems.
Most of the revenues (79%) are from recurring sources, like instruments, accessories, services, etc…
The company is still waiting for regulators' clearance for its devices to be used in colorectal surgery and thoracic surgery, and for approval in Korea and Japan.
Intuitive is by far the company with the most impressive reputation in the sector. The combination of more surgeons trained on the device, more robots per hospital, more hospitals buying it, and new applications green-lighted by regulators should support the company's growth for the foreseeable future.
Investors will want to carefully account for that growth in their valuation model, as the company is expensive compared to its current earnings. This reflects both the company’s quality and market enthusiasm for the stock.
Chinese CATL is by far the largest battery company in the world if judged by the volume of batteries. It produced in 2022 almost half of the world's batteries by GWh.
It also has some of the most advanced lithium iron phosphate batteries, which might be a solution for creating cheaper and “dense enough” batteries for low-cost EVs.
CATL's expertise in battery chemistry extends to other options as well. Notably, the impressive 160 Wh/kg Sodium-ion battery was announced in 2021. By replacing lithium with abundant and cheap sodium, it offers an alternative to lithium whose price has been very volatile and high in recent years. And for applications still requiring lithium, CATL is also investing $1.4B to develop lithium production in Bolivia.
But when it comes to battery performance, CATL is at the very edge of progress. First, it announced a 330 Wh/ kg ultra-durable “million miles” battery that charges to 80% in 5 minutes and is ready for commercialization. This battery should be used by Tesla in the future and will be the new standard for high-performance EVs.
It also very recently announced a record-breaking 500 Wh/kg “condensed” battery, which would be dense enough to power long-range EVs and even planes. It also claims to have found a way to make batteries handle cold weather better, still a weakness of the technology and a problem for EVs in cold countries.
Leaders in EVs like Tesla and BYD, or ambitious new entries like Toyota, might look to develop their own battery technology as a unique advantage. But the rest of the auto industry, including German, American, and Japanese automakers are looking to CATL as a partner to keep up in the race for advanced batteries. This notably includes Ford, Nio, BAIC, Volvo & BMW, Honda, and Mercedes Benz.
CATL has the production volume to benefit the most from economies of scale in battery manufacturing. Its large sales also feed back directly into scientific expertise and a large R&D budget allowing for more breakthroughs. By not being an automaker, it is also a better partner for most of the industry than their direct competitors like BYD and Tesla.
Altogether, this makes a very compelling argument for CATL to stay the leader in battery production. However, the rising tensions between the US and China should not be completely forgotten, and its stock might get caught in the middle of the power struggle between the 2 largest economies in the world.
The company is composed of a complementary offer of e-commerce solution, including logistics, online shop, marketplace, real estate & vehicles (Mercado Libre), and financial services like payments, loans, insurance, investment (Mercado Pago)
The company dominates the Latin American e-commerce sector, with $10.5B in sales, 47.5 million unique buyers, and 3.2 million unique sellers. It is also the leader in FinTech in the region, with $42B of total payment volume, $3.2B in its credit portfolio.
And this is despite the region being notoriously behind in Internet access and with a large portion of the population unbanked.
The position of MercadoLibre in Latin America markets is so strong that with 667 million LATAM visitors per month, it crushes Amazon at 169 million visitors, or for that matter ALL its competitors together, at 493 million visitors.
The company is growing at a very accelerated pace, pushed by internal growth, the region's economic and demographic dynamism, and the adoption of online solutions in Latin America. In Q1 2023, it has grown on a year-to-year basis its net revenues by 58.4%, its net income by 6.6%, and its unique user numbers by 24.5%.
E-commerce adoption is likely to plateau at some point in more advanced regions like Western countries or China. It is only beginning in a region like Latin America. This gives Mercado Libre a wide space for growth, with MercadoLibre being to Latin America what Amazon was to the West in the early 2010s at worst, and in the late 2000s at best. This should give a very wide space for the company to grow, especially as the region is seeing the emergence of a large middle class, which grew by 50% in the last decade.
ON Semi is a semiconductor company with a specialization in electrification, including in automotive, but also in other sectors like solar energy, batteries, aerospace, telecommunication, data centers, and medical. The automotive sector is making 50% of Q1 2023 revenues and is expected to carry most of the company growth until 2025.
Source: ON Semiconductors
A big part of ON Semi’s technological advantage is based on silicon carbide, a new type of silicon compound used for high-energy electric systems. They notably allow for very high power loads, required for the fast charging of EVs.
This makes silicon carbide a cornerstone of all the energy transition and high-tech, from EV to high-power computing and renewable energies.
This strategy of doubling down on silicon carbide led to ON Semi experiencing a 26% CAGR for revenues between 2020-2022, and rising free cash flow from $160M in 2019 to $1.6B in 2022. The free cash flow is projected to double by 2027 according to management's target.
The growth is carried by a very large and diversifying customer base, including most of the largest industrial and technology firms in the world.
Source: ON Semiconductors
With the need for ever more powerful and efficient batteries and electric systems, silicon carbides are becoming increasingly important in the global supply chain. This makes On Semiconductor and silicon carbide the 2020s equivalent of the silicon semiconductor supply chain, posed for outsized growth.
As a leader in the sector, ON Semi is likely to greatly benefit from the electrification trend, especially EVs, but also from datacenters for AI training, solar and battery systems at the utility scale, and the overall electrification trend.
With more and more of our lives and businesses going digital, cybersecurity has become a growing concern. This has only been compounded by the rise of the cloud, with most confidential data now located on some distant servers.
It is to answer to these trends that CrowdStrike was founded, with a cloud-first approach to cybersecurity.
The company's offer covers all categories of cybersecurity threats, and among its clients are 15 of the 20th largest US banks, 70 of the Fortune 100 companies, and 556 of the Global 2000.
The company has achieved $2.7B of annual recurring revenues (ARR) in Q1 2023, a year-to-year growth of 42%, for a free cash flow of $227M, growing at 53%.
CrowdStrike's growth is supported by a quickly expanding total addressable market (TAM), expected to grow 13% CAGR in the next 2 years. With additional offerings still in development, the company expects to expand its TAM from the current $76B to $158B by 2026.
The business model is inherently sticky, with cybersecurity subscriptions something clients will be very reluctant to cut, less they become left exposed to catastrophic risks to their operations.
Another growth factor for CrowdStrike is the expansion of business with pre-existing clients. When a client starts with at least one cybersecurity module, it usually goes on and keeps integrating more modules, with 62% of clients using 5 or more modules, and 23% using 7 or more modules.
This dynamic creates an environment that allows CrowStrike to grow its margins when a relationship has developed for long enough, with an impressive total gross margin of 78% in 2023.
The transition to the cloud is still mostly ongoing for many large companies. This creates a large opportunity for a market leader like CrowdStrike to help them transition their cybersecurity strategy to the cloud as well. The company should also see its international business grow, with still 3/4 of the Global 2000 companies yet to enter the CrowdStrike ecosystem.
Palantir is a somewhat secretive intelligence company founded by PayPal cofounder Peter Thiel. Its offer is to be “Powering AI-assisted decision making — from war zones to factory floors.”
The company claims to be at the forefront of a new arms race, fought in the field of developing AI weapons, between democracies and autocracies.
Palantir is also active in optimizing industrial operations, from Cisco to Panasonic or Novartis.
Still, it seems a lot of the company business is with the US government and the military-industrial complex, notably in May 2023 with a $463M contract for an AI-enabled mission command platform with the US Special Operation Command (SOCOM).
The company has grown its revenues more than 3x since 2019 and had for the first time a profitable quarter in H1 2023, with a net profit of $14M. And $285M of free cash flow in H1 2023.
The company maintains an impressive 80-82% gross margin as well. In Q2 2023, it had a cash stash of $3.1B (10% of total market cap) and no debt.
The actual product delivered by Palantir is a little hard to grasp, due to the rather confidential and sensitive nature of most of the details of its AI-powered services. So investors are forced to judge it from the assessments of Palantir's clients, including the US government and many major international corporations.
From this perspective, it seems that Palantir technology is very impressive, and quickly becoming a central part of the decision-making and problem-solving of the Western economy and governments.
With the AI mania going on, it seems that Palantir is one rare AI company with already proven use cases and technology applied to real-world needs. This should give Palantir a large space for growth, especially as the geopolitical situation of the world seems to get less stable by the day.
Unity Software Inc. (U)
Unity core business is a 3D engine used by video game developers all over the world. It is one of the most popular engines, together with the Unreal engine, indirectly owned by Tencent. The engine also provides a very extensive asset shop, provided for a few tens of hundred dollars in digital assets that would cost hundreds of hours of work to recreate from scratch.
To add to its videogame offer, Unity acquired IronSource, an analytics, monetization, and marketing platform, making it a one-stop shop for developing AND selling a videogame.
This videogame focus has since the early days expanded to all 3D modelization, including in industries like automotive (Mercedes Benz) defense (CACI) or construction (Obayashi). Revenues outside of the game accounted for 40% of Unity revenues in Q2 2023.
Another segment of growth for Unity is film making. With the purchase of Weta Workshop in 2021, famous for the CGI and FX of the Lord of The Ring trilogy, Unity is now able to use its digital asset database to blend the difference between movie and videogame making, like for the water effects of Avatar 2.
The company revenues were down in 2022, with a low of $297M in Q2 2022, bouncing back to $533M in Q2 2023. Still, the company is operating at a loss, mostly due to a massive $267M in R&D.
Every segment where Unity is a dominant force is poised for strong growth. Videogames are now the most popular and highest-revenue entertainment sector, with AR/VR offers only beginning to reach the market.
Movies are increasingly reliant on CGI, with filming in front of a green screen may have been just the first step before AI-simulated actors.
And many industries are now embracing 3D printing, VR, and 3D modeling for designing new components, interfaces, and products.
This makes Unity a strong “pick and shovel” stock for anything related to 3D models, AR/VR, 3D printing, and digital simulation. No matter which VR headset or game & movie IP succeeds, Unity is likely to have been instrumental in making it happen.
The massive R&D spending is hurting the company's profitability, but also helping it grow its offer further. So this is a stock for patient investors willing to wait for Unity to reach the critical mass where it can turn profitable and/or reduce its R&D costs.
When DNA sequencing became a routine procedure in research laboratories in the late 1980s, few realized that it would slowly turn into a common medical testing procedure (PCR tests) as well as the source of a massive wave of new biotech technologies, from gene editing to cancer treatments.
A similar new technology is spatial biology and genomics. This allows researchers to look at a cellular level or even infra-cellular, what genes are active, where, and when. In 2020, the prestigious scientific journal Nature Methods branded spatial transcriptomics “method of the year”. In the long run, 10x genomics is targeting that its technology should replace most of the older, often decades-old, analytic methods in biology labs.
Source: 10x Genomics
This is a market that is just getting started, with most research institutes now starting to get equipped with that brand-new capability.
10x Genomics has grown its revenues by 48% CAGR in the last 5 years, reaching $500m+ in revenues in the last 12 months and a total of 4,250+ instruments sold.
10x growth will be driven by 2 factors:
This dynamic should ensure a steadily growing market, even without taking into consideration growing spending in genomics and biotech in general. In the very long term, the development of medical diagnostic methods reliant on spatial biology will also lead to top hospitals getting equipped as well, the way PCR slowly became a routine testing tool.
Since forever, the way to manufacture items in metal or plastic has been reliant on either forging or molding technologies. In recent years, an entirely new concept emerged, 3D printing (also called additive manufacturing).
It is able to create complex shapes and products that traditional methods simply cannot achieve.
This technology is expected to be more and more adopted by the industry, leading to a 20 % CAGR until 2031 and a $100B market.
Source: Desktop Metal
3D Systems can print 130 materials, producing more than a million parts per day. 64% of revenues are recurring (material, software subscription, etc…).
47% of the company's clients in 2021 were new clients, showing the quick growth of the industry and 3D Systems client base. In 2021, the company's revenues were equally split between industrial and healthcare (mostly prostheses and dental).
It is also working on a 3D bioprinting technology, which could be used to create synthetic organs, with a target for 2026 for the human trial in lung transplant. The addressable market is estimated at $4B.
3D Systems has recently announced the proposal for a merger with its competitor Stratasys. This would put the 3D system much ahead of its closest competitor, Desktop Metal, also competing for Stratasys. In the case of a merger failure (you can read more about the latest news here), investors will need to re-evaluate which of Desktop Metal or 3D systems ends up in the best competitive position.
Source: 3D Systems
Even in the case of a failure of merger with Stratasys, it is likely that the 3D market will be dominated by the 2 leaders, 3D Systems and Desktop Metal. With the market growing quickly, it is likely that both companies can thrive and take over more of the industrial supply chain equipment market, especially in the context of “re-shoring” industries closer to home and out of China.
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Jonathan is a former biochemist researcher who worked in genetic analysis and clinical trials. He is now a stock analyst and finance writer with a focus on innovation, market cycles and geopolitics in his publication 'The Eurasian Century".
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