Jun 01, 2017

Emerging Tech: Augmenting Reality and Opportunities

By Thomas Ansen-Wilson, CFA

Emerging Tech: Augmenting Reality and Opportunities

We recently spent time in Taiwan, Korea, and Japan visiting tech hardware companies to get more insight into the most promising emerging technology developments. Many new technology trends can first be observed amongst the Asian supply chain companies as they win new contracts and prepare to ramp up production lines. These companies can also provide more direct exposure to specific components and features than their generally larger and more diversified customers.

One of the biggest trends in consumer tech is the emergence of organic light emitting diodes (OLED) display. This new display technology offers more vibrant colors, lower power consumption, and sleeker designs than liquid crystal display (LCD) displays, the current standard. As OLED technology further develops, it could enable new products with foldable or even rollable screens (Exhibit 1). These displays will drive the development of new kinds of technology products and will better integrate with the world around us.

Exhibit 1: Flexible Screen

3D sensing is another promising trend. This technology uses infrared light to recognize and map objects and surroundings. 3D sensing is likely to initially be used for gesture and facial recognition but will eventually become a key supporting technology for augmented reality (AR). A promising new technology that creates a digital overlay on top of the real world environment, AR will have a wide variety of applications in fields such as gaming, medicine, education, design, and ecommerce (Exhibit 2). Imagine if a doctor could see a digital marker showing exactly where to make an incision during surgery. Or imagine holding up your phone to your living room to shop for a couch and seeing exactly how the couch would look in the room and knowing with 100% confidence whether it would fit!

Exhibit 2: Augmented Reality

Source: www.bgr.com

These emerging technologies and others offer the opportunity for some tech companies to step up and capture new profit pools and outgrow the overall market. Although many companies will not be able to adapt and innovate quickly enough, overall, tech remains an attractive area for growth investors. However, investing in this space requires the ability to differentiate between trends with real potential and those based on hype, to gauge the size of the opportunity, and to discern which companies will actually generate positive returns rather than growth without profit.

This information is not intended to provide investment advice. Nothing herein should be construed as a solicitation, recommendation or an offer to buy, sell or hold any securities, market sectors, other investments or to adopt any investment strategy or strategies. You should assess your own investment needs based on your individual financial circumstances and investment objectives. This material is not intended to be relied upon as a forecast or research. The opinions expressed are those of Driehaus Capital Management LLC (“Driehaus”) as of June 2017 and are subject to change at any time due to changes in market or economic conditions. The information has not been updated since June 2017 and may not reflect recent market activity. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Driehaus to be reliable and are not necessarily all inclusive. Driehaus does not guarantee the accuracy or completeness of this informa­tion. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

About Thomas Ansen-Wilson, CFA

Thomas Ansen-Wilson is an assistant portfolio manager on the Global Team and a senior analyst on the Emerging Markets Team with a focus on information technology and communication services sectors.

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