Please note: Jupiter and NZS Capital entered into a strategic partnership in Q1 2020 with Jupiter providing trading, operational and distribution support to NZS.
Brinton Johns of NZS Capital considers how Covid has accelerated the shift to a digital economy and which companies will benefit from the changes.

It’s still early days in the transition from the industrial age to the information age. Crises tend to accelerate trends that are already happening, and Covid has certainly accelerated the shift to a digital economy. It has drawn a clear line between companies that are on the right side of time and those that are in decline.

In a post-pandemic world, it’s unclear if the growth in digitally-native companies will be as dramatic as what we’ve seen in 2020. What is clear is that we have established a new floor for the digital economy that we are unlikely to breach. For example, companies will continue to invest in cloud computing services to enable employees to work from anywhere while strengthening digital security. Consumers will likely continue to shift buying patterns to online retailers as convenience, shipping time and pricing all continue to become more favorable. And at least a portion of business travel is likely to shift to video meetings permanently.

Industries changing
We believe we will see the heightened pace of disruption we’ve seen in the technology and media sectors ripple across sectors as well. For example, the auto industry is already seeing huge changes as electric vehicles and autonomous driving raise the stakes for legacy companies. It’s an open question whether it will look more like the technology sector, with its winner-takes-most model. Will we ultimately have two car companies with two operating systems, like we have with our phones – Android and iOS?

We have observed legacy companies struggle to make the transition to technology-enabled platforms. This, combined with easy access to capital, has the potential to enable zombie companies. For example, a US drug store chain’s CEO was asked a couple years ago about the challenges posed by a well-known online retailer’s plan to expand into selling prescription drugs. The CEO said he was not worried. Two years and billions of dollars in share buybacks later, this retailer is no better prepared for its online challenger, which has used incumbent complacency as an opportunity to vastly improve their platform.
Digital building blocks
Semiconductors are the digital building blocks of the information age. They cut across sectors and have become the enabler of technology pushing deeper into the world. Whether it’s autonomous cars, the shift to the cloud, gene sequencing or video calls; the world doesn’t function without semiconductors. We continue to focus work around this ecosystem.
What to expect in 2021
We believe humans are not very good at making predictions, so we won’t do so here. Instead, we’ll attempt to extrapolate trends that are already happening: the shift to the information age will continue unabated, companies that have proven adaptable will likely benefit, and disruption will continue to move beyond the tech sector as it pushes through the entire economy. 2020 has been a year like no other and we all hope that 2021 will settle down, but a heightened pace of disruption is here to stay.

Please note

Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the author at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances.

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