When this strange novel virus discovered in China finally reached the Western Hemisphere in February, nobody knew what to expect. It's not often that pandemics show up and completely shut down our lives.
But as the COVID world became the "new normal," technology kept students learning, businesses functioning, and the world running. Stocks like Zoom (ZM) surged, and the Nasdaq witnessed its best year since 2009. Who would've thought that this was possible after the index dropped over 30% from its highs?
Between January 2, 2020, and December 31, 2020, the Nasdaq gained nearly 46%. More impressive was the Nasdaq's gains of almost 85% between the bottoms of March 23, 2020, through the end of the year. Although the Nasdaq has somewhat cooled off from record highs reached in the first week of the new year, the tech-heavy index still managed to gain 2.4% in that week.
Overstretched valuations are certainly a concern, however. Three of the ten biggest IPOs for U.S. tech companies took place in 2020, including Snowflake’s (SNOW)-the largest IPO in history. Airbnb (ABNB) and DoorDash's (DASH) IPOs also screamed exuberance, mania, and euphoria not seen since the dotcom bubble of the early 2000s.
There are also concerns for tech with Democrats winning full control of the Senate. With Democrats controlling both the executive and legislative branches of government, tax hikes on high-flying growth companies could pass more quickly, along with stricter regulations. While a tax hike may not necessarily be imminent in 2021, it is still a risk.
Additionally, love him or hate him, social media’s censorship of President Trump raises questions of whether or not big tech has too much power to regulate and dictate free speech and censorship.
Be that as it may, there are some strong tailwinds and tech opportunities in the coming year—particularly in specific sub-sectors.
But to look forward, we first must take a step back. According to ETF.com, the top-performing tech ETF in 2020 was the ARK Next Generation Internet ETF (ARKW).
Between March 23, 2020, and the end of the year, ARKW outperformed the Invesco QQQ ETF, which correlates with the Nasdaq QQQ, by nearly 2.5x.
If we break down the Ark Next Generation ETF (ARKW), we can see why it performed as well as it did and which of the emerging tech sectors in this ETF could continue to outperform in 2021 and beyond.
The ARK Next Generation ETF is an ETF that devotes its holdings to companies at the forefront of innovation and technological disruption. This ETF especially loves companies involved in the shift to the cloud and mobile and companies that could benefit from the increased use of shared technology, infrastructure and services, internet-based products and services, new payment methods, big data, the internet of things, and social distribution and media.
According to ARK, this ETF holds companies that could potentially contribute to the following sectors:
● Cloud Computing & Cyber Security
● Big Data & Artificial Intelligence (AI)
● Mobile Technology and the Internet of Things
● Social Platforms
● Blockchain & P2P
Three of these sectors sent ARKW higher in 2020 and could continue to outperform in 2021 and beyond.
This trend will likely only heat up more in 2021, even if we get back to some kind of “normal.”
Edge Computing could be a specific segment of Cloud Computing to look out for.
An excellent way to look at Edge Computing is to see it as “Cloud Computing 2.0.” Edge Computing's primary purpose is to solve Cloud Computing's latency issues as companies' data needs continue to grow and evolve. Edge Computing can also act as mini data centers and process time-sensitive data in remote locations, even if these locations lack bandwidth or connectivity.
According to a Digitalcommerce360 report, U.S. e-commerce sales grew by 40.3% in 2020. To put in perspective how staggering this is, the U.S. hit e-commerce numbers that it wasn’t projected to hit until 2022. Thank COVID for that.
These are some of the trends to monitor in 2021, according to 3dcart:
1. Voice Commerce
2. Omnichannel Shopping
3. Usage of AI and AR To Improve Customer Experience
4. Usage of Dynamic Pricing Software
5. Mobile Commerce Becoming the Face of E-commerce
6. Sustainability Practices Influencing Sales
7. Visual Commerce
FinTech is taking center stage as the world is becoming increasingly borderless, cashless, and focused on customer experience. The global FinTech market is expected to grow at a CAGR of 20% between 2020-2025 and reach a market value of around $305 billion.
Three FinTech trends in 2021 to specifically focus on are quantum computing, mobile payments, and blockchain/decentralized finance.
Quantum computing's power and ability to query, monitor, analyze, and act on data regardless of the source, has been vital in slowing the spread of COVID-19 and in developing vaccines. Financial institutions have noted quantum computing's benefits and have adopted it to manage credit risk, monitor trading, and detect fraud. Revenues for the global quantum computing market could also exceed $2.5 billion by 2029.
Buoyed by social distancing and isolated humans spending more time on their phones, mobile payments surged in 2020. While not all of the more than 5 billion mobile users in the world engage in mobile payment transactions, proximity mobile payment users are forecasted to grow from 950 million to around 1.31 billion by 2023. Allied Market Research also claims that the global mobile payment market could hit a $12.06 trillion market value by 2027 at a CAGR of 30.1%.
Our world is becoming increasingly decentralized, and finance is no exception. Decentralized Finance or DeFi is an ecosystem of blockchain-based financial applications. DeFi, as a borderless, accessible, and open alternative to mainstream financial services, surged in 2020 and could be positioned for an even bigger 2021.
Although Bitcoin got most of the glory in 2020, DeFi quietly may have had an even bigger year. At the beginning of 2020, the total value locked into the DeFi market was around $680 million. By the end of the year, this figure gained an astounding 2159% and surged to $15.362 billion.
Since 2021 started, the DeFi sector has not slowed whatsoever and has added nearly a billion dollars worth of additional value per day.