The ongoing rise of big tech

SPONSORED CONTENT - 2020 has cemented the importance of technology companies in life and the markets.

It’s hard to deny that in the 21st century, big tech is king. As digitisation has pushed forward in almost every industry you can think of, and mobile devices have penetrated all aspects of our lives, new companies have exploded onto the scene to become the largest businesses on the globe. Meanwhile, mainstays like Apple and Microsoft have cemented their positions and diversified.

The fast-changing tech sector is not without risks, but as a booming industry that is home to some of the world’s biggest businesses, there’s also the potential for significant returns. Big tech is a market that deserves an investor’s serious consideration.

Everywhere you look

Big tech has achieved an unprecedented ubiquity in recent years. It covers an enormous range of products from hardware like computers, televisions and smartphones through innovative blockchain and Internet of Things (IoT) technologies to software and services for personal and business use. There are few aspects of our lives that aren’t touched by it in some way, from exercise, leisure and travel at the micro level to large-scale civic projects like the development of “smart cities”.

It’s impossible to overstate how central tech has become to our day-to-day lives. Statista reports that 3.5 billion people in the world own a smartphone, which means that 45% of the global population have a device in their pocket that can connect them directly to the internet wherever they are. According to phone usage monitoring app RescueTime, the average time spent on a phone in 2019 was 3 hours and 15 minutes a day. And in our homes, IoT devices are increasingly prevalent, allowing us to see who is at the door from our phone and to control our heating and lighting from an app or even a voice command.

Big tech has also overseen the mass digitisation of the working environment. The vast majority of us work from computers now, and many of the formerly common physical trappings of the office – the paper, stationery and filing cabinets – have all but vanished. As with many industries, tech is increasingly shifting to incorporate services as well as goods. The cloud is home to many business systems that allow users to access and share information conveniently and seamlessly. The growing choice of “as-a-service” offerings is changing the business landscape, allowing new companies to pay for what they need when they need it, rather than requiring a large initial capital expenditure on hardware, software and infrastructure that they may or may not end up using. This has proven a huge boon to SMEs.

There’s a reason they call this the “Digital Age”. At home, at work and everywhere in between, big tech’s presence can be felt and seen. The nature of these businesses is to change and grow, developing technologies that we might never have imagined but will soon be taking for granted. And while 2020 has been a year of upheaval, it has only highlighted the importance of big tech.

Connecting the world

When coronavirus sent the globe into lockdown, many industries were hit hard. But the Covid-19 pandemic has conversely given big tech a chance to shine. Just as big tech companies were key in the US market rallying following the 2008 financial crisis, in the 2020 downturn they have performed better than many expected, which may account for the quick recovery of the Nasdaq index while its less tech-orientated fellows were still struggling.

Many of these companies that were already a deeply embedded part of our lives have proved themselves to be essential. Indeed, without the level of connectivity and reliability the tech giants have delivered, the impact of lockdown could have been much worse across the board.

Imagine an entire workforce attempting to work from home even 10 years ago. Email and phone calls would have been our primary methods of staying in contact, neither of which is fit for purpose as a primary tool of day-to-day communication. Collaboration and video-conferencing tools offer simple and reliable methods of communication that have minimised disruption for many businesses and allowed operations to continue with a relative degree of normality. Microsoft reported a surge in use of its Teams collaboration tool in March as lockdown began, peaking at a reported 44 million daily active users – an increase of 20 million from November 2019.

Facebook and the other companies that dominate the internet are continuing to sit pretty, as many of our day-to-day interactions and activities have shifted online. Ecommerce has boomed as a safer alternative to visiting bricks-and-mortar shops. Meanwhile, Google and Apple have even been tapped by the UK government to deliver a test-and-trace app.

Manufacturers, distributors and managed service providers (MSPs), whose success had already been fuelled by the uptick in agile working practices of recent years, have become important enablers of the new working model. Laptops, for instance, have become a hot commodity that allowed the smooth transfer of millions to working from home. Big tech has become integral to keeping the global economy moving.

CMC Markets offers a straightforward way to take a position on the entire big tech sector through its share baskets. Share baskets offer investors a cost-effective way to trade a wide range of industries and themes, while diversifying their exposure within a theme. CMC’s Big Tech share basket features some of the biggest names in the industry. This includes four big tech companies that hit trillion dollar market caps – Apple, Microsoft, Alphabet Inc and Facebook – alongside the likes of NVIDIA, Adobe Systems, Salesforce.com, VMware Inc, Intel and IBM.

Find out more, and test-run a demo account, at cmcmarkets.com.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

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