Welcome to Soundbites, weekly insights on market trends and investment strategies, brought to you by Investment Executive and powered by Canada Life. For today’s Soundbites, we’re talking about potential growth areas in tech with Jyotsana Wadera, senior investment director with Putnam Investments. We talked about the outlook for tech, some lesser-known names that she’s watching in the tech space, and we started by asking whether the gains spurred by AI can continue apace in 2024.

Jyotsana Wadera (JW): Generative AI capabilities really came online late 2022 and 2023. And what we really see in the marketplace today is the obvious first-derivative beneficiaries. Those are the Nvidias of the world. AMD would be another stock I would mention. And so when asked about the gains, I think what we have not yet fully realized is the hyper scalers are going to be the real beneficiaries over the next 12 to 18 months. That is where I think the potential is probably underestimated. These hyper scalers are spending aggressively now so that they are well positioned to be the leaders for generative AI. Obviously, they have to put a lot of money into the infrastructure but what we recently saw is that that investment has actually paid off.

What could impact the growth of AI?

JW: Despite the promise and potential of generative AI, I think there are risks that we have and will continue to monitor. Key, I think will be data privacy, intellectual property rights, costs and, quite frankly, just the accuracy of the data that’s coming out. And, also, I think we can’t underestimate the potential for regulation in this industry. We expect that standards and regulations will emerge, which will help mitigate some of these risks. But they can be disruptive to, I’d say, the trajectory of some companies. Having said that, this doesn’t change our enthusiasm for the technological advancement that we’re seeing here.

The outlook for tech in 2024

JW: The technology sector is obviously an exciting space. And I know there’s been a lot of focus on the performance of the Magnificent Seven. But even ex the Magnificent Seven, the S&P 500 benchmark returned close to 14% last year. If you looked at the growth universe that was up 42% last year, ex-Magnificent Seven they had a return of 26%. I bring those stats up to say that there’s a lot more happening in technology. There’s [San Jose, Calif.-based] Cadence Design Systems. There’s [Santa Clara, Calif.-based] Palo Alto Networks. Think about cyber security and the like. So there’s a lot of exciting initiatives happening in technology. And also, it’s a sector that has the domino and trickle-down effects to be a tailwind to a lot of other industries, such as industrials and consumer discretionary and cashless payments. So, if you ask me to bet where I think the growth in the marketplace is five years from now, whether I’d bet on areas such as energy or financials or healthcare or technology, I’m going to pick technology.

Lesser-known names to watch in the tech space

JW: There’s been a lot of hype around autonomous and electric vehicles. And of course everybody talks about [Austin, Tex.-based] Tesla. And sometimes that stock’s up a lot and sometimes that stock’s down a lot. But from our lens, electric vehicle penetration right now is less than 3% of new car sales today. And self-driving vehicles are really only in the testing phase. So there is a huge potential revenue opportunity. Now there are views that it is not going to be 25% or 30%. But we have comfort in that it is going to be more than 3%. It can be 4% this year, or 5%, or 6%. And that’s a huge tailwind to semiconductor companies. So, you know, beyond autonomous driving, semiconductors are used in a range of features for cars. So you have to do the cameras, the sensors, the internet connection. And so when you look at what’s happening just in that space, semiconductors are going to be long-term beneficiaries.

And finally, what’s the bottom line for growth investors?

JW: The way I like to say it is you have to be present to win. What I mean by that is that there’s this view of moving in and out of the growth space and of the technology space. But there are continued tailwinds, particularly for growth investors, and particularly in the technology space. When I look at where innovation is, and I look at where growth is, whether it’s in the U.S., in Canada, in Europe, in emerging market, it is areas like technology and healthcare that are going to be driving forces of growth. Technology can be crowded. But I think that there’s just amazing opportunities and exciting opportunities, and these are trends that we think are long term, and are here to stay, and more importantly that they’re durable.

Well, those are today’s Soundbites, brought to you by Investment Executive and powered by Canada Life. Our thanks again to Jyotsana Wadera of Putnam Investments. Visit us at investmentexecutive.com, where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.


Go back to the article.

CAN U.S. All Cap Growth – segregated fund
Canada Life U.S. All Cap Growth Fund – mutual fund
CAN Croissance toutes capitalisations américaines – fonds distinct
Fonds de croissance toutes capitalisations américaines Canada Vie – fonds commun de placement