Digitalization & Big Data

By Vigilant Wealth Management on January 28, 2025

This is the first in a series of bi-monthly posts on Secular Investment Themes (SITs). The objective of these posts is to provide the reader with a better understanding of how Vigilant incorporates our thinking on broader economic trends and themes into the investment research process. The Investment Policy Committee (IPC) focuses on identifying long-term trends that reflect the priorities of society, believing that investments in companies that are aligned with these themes have the potential to deliver favorable risk-adjusted returns. Key factors in identifying these trends include demography, consumer preferences, geopolitical landscape, innovation, monetary policy, fiscal spending, and capital investment priorities. We have identified five key SITs expected to attract significant capital spending from governments and private enterprises.

Digitalization & Big Data

Given its influence on recent market returns and capital investment, we start with Digitalization & Big Data. This theme has driven economic growth for decades, dating back to the invention of the integrated circuit in the 1950s. Over recent decades, technology has gone through five computing revolutions: Mainframe Computing (1980s), Personal Computing (1990s), Mobile Computing (2000s), Cloud Computing (2010s), and now Accelerated Computing (2020s). Each revolution has significantly disrupted business operations and consumer interactions.

OpenAI’s release of ChatGPT in November 2022 marked a pivotal moment when Artificial Intelligence (AI) transitioned from science fiction to transformative technology. Today, we find ourselves at the beginning of what could ultimately become one of the most significant periods of technological advancements to-date, the Age of AI.

Defining Key Terms

Accelerated Computing: The infrastructure upon which AI models and applications are developed and deployed, powered by Graphics Processing Units (GPUs) rather than Central Processing Units (CPUs).
Artificial Intelligence (AI): The models or applications themselves, such as OpenAI’s ChatGPT.

Opportunities in Digitalization & Big Data

Persistent technological advancements can lead to inflection points that create opportunities for businesses to invest in technology to improve operations and for consumers to leverage new technologies to enhance their daily lives.

Digitalization: The adaptation of systems or processes to be operated by computers.
Big Data: The collection, analysis, and utilization of data to improve business operations and outcomes.

Over the past few decades, enterprises have evolved by adopting technologies that improve business processes across Information Technology Services, Human Resources, Sales, and more. AI applications, powered by Accelerated Computing infrastructure, have already begun to deliver productivity gains for many Fortune 500 companies. As enterprises shift from the Planning Phase to the Implementation Phase, AI adoption will accelerate, with enterprises leading the way, followed by consumer adoption.

Investment Strategy at Vigilant

At Vigilant, we ensure our portfolio companies align with one or more of our Secular Investment Themes. The investable universe of companies that align with the Digitalization and Big Data theme extends beyond the Information Technology (IT) sector. Within IT, we invest in a diverse set of companies across different industries and layers of the technology stack:

Semiconductors: Companies that design and manufacture integrated circuits for data centers, smartphones, and automobiles.
Hardware: Companies that build data center scale systems or edge devices such as smartphones and PCs.
Software: Companies deploying AI to improve enterprise business processes and outcomes.

We believe in building a portfolio with exposure to each of these industries and layers of the technology stack, from Infrastructure to Platforms to Applications. Beyond the Technology sector, companies across all sectors could align with this theme. For example:

Healthcare: Pharmaceutical companies using AI to speed up drug discovery.
Financials: Banks deploying AI for fraud protection.
Industrials: Car manufacturers using AI and digital twins to improve manufacturing processes.

Conclusion

Recent advances in technology, from infrastructure to platforms to applications, have laid the foundation for a strong, multi-year AI secular growth story for companies aligned with the theme of Digitalization and Big Data. AI, as an enabler of productivity gains and an accelerator of economic growth, remains in the early stages. Over time, AI will seamlessly integrate and become another layer of the technology stack for any business aiming to compete in the modern world.

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Vigilant Wealth Management is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC (member FINRA and SIPC). Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

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