Do not bet against the technology sector. The industry has bounced back historically from setbacks with a vengeance, and there is no reason it will not do so again, says Anurag Bansal.

Technology investments have created immense wealth over the last few decades. However, the innate nature of technology is growth-oriented, which means a higher risk and higher return. Therefore, in risk-averse environments such as now, the markets may reduce investments, which leads to a correction in the sector. Here, I’m not primarily talking about the companies like Alphabet and Meta that generate revenues primarily by advertising, but the IT companies that sell technology-related hardware and software. The sector has witnessed steep stock price declines periodically, often more than broader markets leading many to believe that the industry could remain in a bear market for long periods. 
 
In 2022, one of the most significant years in recent history, there were a number of events that impacted technology stocks. These include rising interest rates, geopolitical instability, and concerns about supply chain disruption. According to an analysis by Meritech, the market capitalization for the fastest-growing SaaS companies has fallen by almost 70%. The volume of emerging startup company's late stage financing rounds have also collapsed.
 
But, as the below chart (S&P Tech Index and MSCI World IT Index compared to S&P 500 Index) shows, over the last 25 years, the technology sector has fallen in a risk-off environment and has bounced back faster and stronger than the rest of the market after that. Although the index considered here has companies like Alphabet and Meta, the outperformance still holds without them.
 

Would you bet against the turnaround in the technology sector, especially now that innovations are accelerating, creating more value for each company and industry besides solving grand challenges? I will not!
 
Ray Kurzweil's "Law of Accelerating Returns" encourages faster innovation due to technological advances.
 
Consider this; until a decade ago, every country seems to like solar as a solution to carbon emissions from power generation. Novel innovations in bringing down the cost of installing solar, becoming comparable to fossil fuel, pushed the governments in its favor. Now, every government around the world has ambitious solar deployment goals. Last year, a record $1.1 trillion was invested in clean energy transition worldwide.
 
We all know the transformation bought by the advent of smartphones. Remember how quickly landlines gave way to mobile phones; now, smartphones are pervasive. It democratized and demonetized several services and products we used separately. We now even have wifi on a plane, 34,000 feet in the sky; it was unthinkable just a few years ago. Imagine how much business activity will increase and social upliftment will happen when the rest of the unconnected world can access the internet through programs such as Elon Musk’s OneWeb program.
 
The disruption is not limited to a country or a particular economic sector. Technology is becoming the heart and soul of every company’s growth strategy. No industry is untouched by technology. Innovation is racing ahead to make everything bigger, better, faster, and cheaper.
 
Every company is integrating technology to connect closely with customers in every corner of the world, innovate rapidly, and gain efficiency in operations. Cloud computing helped us navigate the tough times during COVID-19, and businesses could still operate with remote work amid lockdowns. Industrial processes and the services sector are digitizing, and decisions are being made using data, where digital twins are helping virtually see possible outcomes of a specific solution and adjust accordingly to get desired results. AI/ML and the internet of things are becoming pervasive in decision-making. DNA sequencing and gene editing are promising to treat and even cure chronic conditions, expanding a healthy lifespan. Imagine the disruption ChatGPT is creating in various industries.
 
Human evolution may have reached its pinnacle in physicality, but our mind is boundless and will keep evolving and innovating. In our lifetime, we will likely see paradigm shifts in how we live, interact, do commerce, and travel, along with solutions to leave the planet better than we inherited.
 
(Read original story at boundlessanurag dot com)
 
About the Author: Anurag Bansal is a Disruption Analyst and Managing Director at 13D Research & Strategy.
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**Disclaimer: Views expressed here are personal and do not represent any institution or entity I’m associated with.