Interactive Investor

Ian Cowie: here’s how to profit from the latest tech trend

Our columnist explains that while AI hit the headlines last year, 2024 will see another tech trend take hold. He explains why he thinks serious money will be made, and runs through investment trust routes to take advantage.

11th January 2024 09:03

Ian Cowie from interactive investor

Apple Vision Pro, the first mixed-reality headset and 3D camera from the world’s biggest technology business, will go on sale next month and accelerate the trend of turning science fiction into commercial fact. Please don’t call them goggles for geeks.

More seriously, investment trusts, such as Allianz Technology Trust (LSE:ATT) and Polar Capital Technology (LSE:PCT), offer cost-effective ways to keep up to speed with digital innovation we might otherwise struggle to comprehend. You don’t need to understand the jargon to participate in the wealth it could create.

For example, just as 2023 was the year that artificial intelligence (AI) hit the headlines when Microsoft Corp (NASDAQ:MSFT) invested $13 billion (£10.2 billion) in machine learning and smart robotics, 2024 could be the year augmented reality (AR) means real human beings spend more time and money in our own digital space. If that sounds rather bleak, then bear in mind that Apple Inc (NASDAQ:AAPL) points out one potential use for its AR headset is to immerse yourself in 3D versions of all those digital photos on your iPhone.

If you are like me, you will have hundreds of these snaps tucked away, because they were easy to take, since we have all been effectively carrying a camera in our pockets for the past couple of decades. But I rarely look at these pictures and Apple Vision Pro sounds a vivid way to refresh and renew fond memories.

It would be good to feel like I was in the garden again with our grown-up son when he was a little boy - or, indeed, my wife when we were both a bit younger. I suspect I won’t be the only Boomer tempted to consider a purchase after these headsets go on sale outside America and come down from their somewhat steep initial price of $3,499 - which is primarily aimed at App developers and other professionals.

Back to the business of obtaining a share in the ownership of Apple, Microsoft, and other companies that are creating the future of computerised consumption, the investment trusts mentioned earlier - Allianz Technology and Polar Capital Technology - both enable individual investors to share the cost of professional stock selection but offer different ways of doing so. Both include Apple and Microsoft in their top three holdings by value, with the graphics processing unit (GPU)-maker NVIDIA Corp (NASDAQ:NVDA) making up the top tech triumvirate in each trust.

Where these funds differ is that Polar Capital Technology is more mainstream, with the rest of its top 10 comprised by familiar names including Meta Platforms Inc Class A (NASDAQ:META), the owner of Facebook; Alphabet Inc Class A (NASDAQ:GOOGL), the owner of eponymous search engine; and the self-descriptive Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM).

Meanwhile, ATT’s top 10 includes more esoteric assets such as Lam Research Corp (NASDAQ:LRCX), the “wafer fabrication semiconductor company”; MongoDB Inc Class A (NASDAQ:MDB), the “developer data platform”; and Monolithic Power Systems Inc (NASDAQ:MPWR), which is, apparently, a “fabless company that provides semiconductor-based power electronics solutions”.

Now you know. Well, I did say part of the appeal of these investment trusts is that they give everyone access to digital innovation, even if we hardly know our AR from our AI.

In practice, these fund managers’ different approaches to the same sector mean that PCT is marginally ahead over the last year, when the blue-chip tech businesses now known as the Magnificent Seven - Apple, Microsoft, Alphabet, Inc (NASDAQ:AMZN), Nvidia, Tesla Inc (NASDAQ:TSLA) and Meta - beat everything else out of sight. But Allianz Technology can justify its more adventurous approach with outperformance over the last five years and decade.

To be specific, Allianz Technology delivered total returns over the last year, five years and decade of 41%, 132% and 448%, according to independent statisticians Morningstar. Over the same three periods, Polar Capital Technology provided 43%, 119% and 407%.

Neither of these trusts yields any dividend income but total returns like those listed above can justify the absence of jam today. Both trade at discounts to their net asset values (NAVs) of about 12%, with similar ongoing annual charges of 0.7% for Allianz Technology and 0.81% for Polar Capital Technology.

To return to where we began, a wide variety of tech innovation was unveiled this week at the Consumer Electronics Show (CES 2024) in Las Vegas, ranging across digital health, sustainability, gaming and cybersecurity. As usual, much of the mainstream media coverage concentrated on quirky trivia - such as digital binoculars that will help twitchers identify the birds they are looking at. 

Meanwhile, I suspect serious money will be made by wearable tech, such as Apple Vision Pro or the Nuance Audio smart spectacles that double up as hearing aids, made by the Oakley and Ray-Ban owner Essilorluxottica (MTA:EL). I can’t be the only Boomer whose sound and vision aren’t quite what they used to be but doesn’t want to wear a hearing aid.

On the other hand, maybe my optimism about the potential demand for this kit is just wishful thinking by an investor talking his own book.

Either way, investment trusts such as ATT and PCT provide diversified exposure to exciting innovations and a convenient way to buy a stake in tomorrow today.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Apple (AAPL), EssilorLuxottica (EL), Microsoft (MSFT) and Polar Capital Technology (PCT) as part of a globally diversified portfolio of investment trusts and other shares.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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