Within an investment universe that’s always changing, the tech sector may be the hardest of all to keep up with. For the year ahead, investors should keep an eye on artificial intelligence (AI), 5G and online payments, says Jonathan Mzengeza, portfolio manager for technology at CIBC Asset Management.
AI has been a growing focus for many of the world’s leading tech companies, but Mzengeza is focused on natural language processing.
“In 2020 there’s going to be a big jump in usage on natural language processing,” he said in a Dec. 16 interview, as more companies use the technology to analyze documents and gain insight from their information.
This data has to be stored somewhere, which benefits memory and storage companies such as Micron Technology, he said. However, he’s not invested in Micron.
“We’d rather invest in companies that provide the infrastructure for Micron to create their chips,” said Mzengeza, who manages the CIBC Global Technology Fund and the Renaissance Global Science and Technology Fund.
One such company is Lam Research. Lam’s stock was up 119% last year, according to Bloomberg.
Mzengeza also likes processing chip manufacturers Nvidia and Xilinx. Nvidia gained more than 75% last year, while Xilinx’s annual return was almost 17%, per Bloomberg.
With Apple likely to launch 5G phones in the second half of 2020, Mzengeza predicted they’ll be big sellers.
The 5G technology allows for enhanced entertainment and social media use, he said, and will eventually be used to implement new technologies such as self-driving vehicles.
Mzengeza is also watching digital payment companies, as he expects online shopping will continue to grow. North America is still in the “early stages” of e-commerce, with a penetration rate around 8%, he said, compared to 15% to 20% in Europe.
Shopify, which provides payment infrastructure for websites, will be a beneficiary, he said. The Ottawa-based company saw its stock surge more than 181% last year, according to Bloomberg.
“We also think that, over time, there’s going to be the rise of digital wallets, in terms of allowing people to transfer money more easily between themselves,” he said.
Venmo, PayPal’s digital wallet, and Square’s Square Payments could be the beneficiaries of that trend, Mzengeza said.
This article is part of the AdvisorToGo program, powered by CIBC. It was written without input from the sponsor.