- Morgan Stanley published a note on Wednesday identifying the 12 tech trends that are accelerating due to COVID-19 and the companies most likely to benefit from it.
- The trends include a faster adoption of cloud services, wider use of e-commerce services, and the growth food delivery apps, among others.
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The COVID-19 disruption has served as a wakeup call to many companies, as the pandemic is requiring a greater digital presence for businesses to succeed.
Retailers are scrambling to enhance their e-commerce offerings, while restaurants are beefing up their online delivery capabilities. Every company is now looking to add some kind of cloud service, as more business is done remotely.
In light of this change, Morgan Stanley identified 12 of the most important tech themes to follow across technology, retail, food, and health sectors. While all of these trends were already under way before COVID-19, they’ve grown in importance following the pandemic, the investment bank wrote in a note published Wednesday.
“These trends are likely to drive structurally higher investment in technology and prove sustainable long-term, as the benefits of digitalization last well beyond the pandemic,” the note said.
Listed below are the 12 tech themes that Morgan Stanley believes are accelerating due to the COVID-19 disruption, and the firm’s explanation for each trend (plus the companies most impacted by it):
- Accelerating Public Cloud Adoption: “Leveraging the public cloud is becoming key for business survival as companies focus on improving connectivity during COVID-19. As a result 89% of CIO survey respondents (in March) signaled they expect to accelerate public cloud adoption.” (AMZN, MSFT, GOOGL, CRM, WDAY, etc)
- E-Commerce: The 2 Year Pull-Forward: “2020 is setting up to be an e-commerce inflection year as the combination of shelter-in-place, lower spend on experiences (dining out, bars, travel, etc), and gov’t stimulus have driven dollars online.” (AMZN, CHWY, EBAY)
- Accelerating Contactless Payments: “The market assumes that COVID-19-related adoption of digital payments is a nearterm benefit for Payments providers, offsetting some of the consumer spend headwinds. However, digitization of Payments is part of a multi-year secular growth driver in Payments, with COVID-19 as just the latest accelerator.” (V, MA, PYPL, AAPL, LYV, etc)
- Food Delivery Digs Into Restaurant TAM: “We see ’20 as an inflection year within online food delivery, essentially pulling forward ~1.5 years of consumer spend and 3 years of penetration and while unit economics are improving, the potential entrance of JET complicates the push for consolidation/rationalization which we think is needed.” (UBER, GRUB)
- Death of Paper, Rise of Automation: “The flexibility to WFH has the potential to accelerate declines in the commercial printing market. The digitization of business processes is likely to compound these declines, but presents an opportunity for tech vendors that can offer digital experiences.” (DOCU, CRM, NOW, APPN, MSFT, SMAR, etc)
- Digital Entertainment & Network Connectivity on the Rise: “We believe COVID-19 and the increased demand for connectivity has amplified the importance of 5G network rollouts, for which we see mid-band spectrum as a critical catalyst, to support secular growth in categories including video and music streaming, and online gaming.” (NFLX, SPOT, DIS, TMUS, AMT, CCI, etc)
- Data as the Differentiator: “COVID-19 is accelerating the digitization of workflow solutions which generates faster data growth and use of analytics, allowing businesses to derive data-driven insights, improve competitive advantages and profitability, and drive structurally higher IT spend.” (VRSK, TRI, EFX, TRU, NVDA, etc)
- Navigating Tensions on the Global Trade Map: “Trade tensions in semis lead to short-term challenges (volatile customer inventory behavior around tariffs and buffer stocking), intermediate-term challenges (Chinese customer preferences for non-US silicon) and longer-term challenges (incentives for countries to invest in competing supply chains).” (ST Micro, NXP)
- Collaboration Tools: Working Together When Working Apart: “Our survey indicates a 2 year pull forward of the TAM as WFH drives demand for collaboration tools on the cloud and large platform players, particularly where the transition is more difficult (e.g. telephony, VDI, team collaboration).” (ZM, MSFT, WORK, TWLO, RNG, etc)
- Ad Spend Shifting from Offline to Online: “We expect online advertising to recover faster than other ad verticals given its leading reach, return on investment and direct measurability, and see a significant opportunity to capture increased SMB ad spend with a push into social commerce.” (GOOGL, FB, SNAP)
- Jump-Starting the Heartbeat of Health Tech: “We think investors don’t fully appreciate the impact COVID-19 will have on accelerating big tech’s entrance into healthcare. In the past 3 months we’ve seen a significant shift in consumer preferences towards digital health solutions, which we believe is here to stay. Regulatory barriers are also coming down, opening the door for new entrants.” (AAPL, AMZN, GOOGL, MSFT, FIT, etc)
- AR/VR To Usher in a New Medium for Digital Interactions: “COVID-19 should help expand AR/VR use cases because the need to interact at a distance has never been so mandatory, ushering in a whole new normal for how people will approach in-person interactions in the future.” (AAPL, MSFT, GOOGL, FB, SNAP, etc)
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