Why invest in the high-tech sector?

Enormous growth has advantages and disadvantages

Many believe that investing in high-tech equities is almost a guaranteed success. After all, the high-tech sector has the strongest long-term growth in turnover and profits. Nevertheless, there are hardly any other sectors in which more companies, and thus also more investors, start up business with high hopes and end up failing miserably.

And at the same time, market leaders can hardly change faster anywhere. Last year, the “glorious seven” made a name for themselves (Nvidia, Apple, Microsoft, Meta, Amazon, Alphabet, Tesla). They made huge gains and almost single-handedly pulled up major US equity indices due to their high and growing market weight. This year, however, only four of these equities are still among the top performers.

High tech is a broad, highly complex field of business

For investors in the high-tech sector, this means that important developments always have to be monitored, in order to identify the most promising emerging companies at an early stage as well as to be able to jettison equities in a timely manner when they have passed their prime and their market position is liable to permanently deteriorate. Naturally, it is also very important to carefully consider whether the price for a equity is appropriate. Strong growth is cold comfort if the price you pay is too high. It makes sense to concentrate on a few especially important, promising aspects and areas.

Focus on disruptive innovations and robust growth

Raiffeisen-HighTech-ESG-Aktien concentrates on companies with especially strong growth and/or disruptive innovations. Disruptive innovations are new products and processes which result in radical changes to existing products and technologies, and often even entire sectors and human society in general. Examples of this include lightbulbs, the telephone, assembly lines, or the Internet... Disruptive innovations and technologies often lead to exponential growth in productivity, also often triggering such growth in a variety of areas that are not initially impacted directly. The problem is that investors almost always underestimate both the scope and speed of the resulting changes. In turn, this opens up a wealth of opportunities for those who recognise the potential for change in full or at least better than others.

Focused investment decisions and sustainable investing with Raiffeisen-HighTech-ESG-Aktien

In order to exploit this potential for returns as best as possible, the fund management of Raiffeisen-HighTech-ESG-Aktien focuses on a relatively concentrated portfolio of around 40 equities. On the one hand, this allows for good diversification, while on the other it is possible for the individual positions in the fund to make significantly strong contributions to earnings. Active management with focused investment decisions (and corresponding substantial deviations from conventional sector indices) is the guiding principle. At the same time, the fund also takes ESG criteria into account.

Raiffeisen-HighTech-ESG-Aktien

Excellent performance since fund launch

Since the launch of the fund more than 20 years ago, Raiffeisen-HighTech-ESG-Aktien has delivered the strongest annual performance out of all of Raiffeisen KAG’s funds. In its peer group, the fund is among the leaders both over the short-term and long-term horizons. But before you jump in and order, it is important to recall that this performance was also marked by significant price volatility and setbacks. Consequently, this fund requires a long-term perspective (i.e. an investment horizon of at least 10 years), along with high risk tolerance and risk appetite. At this juncture, it should also be noted that the excellent results from the past are not a reliable indicator for the future development of returns and do not allow for any conclusions to be drawn with regard to the fund’s future performance.

Artificial intelligence: robust growth

Artificial intelligence (AI) may quite literally result in radical or at least significant changes in all sectors of the economy and in many other parts of life in general. The field of AI as a whole (hardware and software) may exhibit annual growth rates of 30% to 40% in the next 10 years, probably making it one of the most dynamic areas. The main players in this field include chip manufacturers such as Nvidia and AMD on the one hand and those who create AI applications using these chips (e.g., Alphabet, not currently in the fund) on the other.

Semiconductors: building blocks for the modern world

At the same time, this all results in massive increases in requirements for computing power, storage space, data transmission, communications infrastructure, and the like, which should also generate strong additional growth in the semiconductor industry. Semiconductors/computer chips are the basic building blocks of modern civilisation and the world is in constant need of more specialised, and more powerful chips. In addition to the previously mentioned Nvdia and AMD, these include Taiwan Semiconductor and Applied Materials.

Cloud infrastructure: as necessary as streets and railways

Cloud solutions are closely related to AI, as well as to the digitalisation of everyday life and automation in the economy. Cloud infrastructure, including data centers, is now as important for the economy and society as streets, bridges, and railway lines. In general, it is anticipated that this area will expand at annual rates of around 15% in the coming 6 to 7 years. Major actors in this market include Miscrosoft and Amazon.

IT security: an absolute necessity

All of these developments also have downsides, and one of the biggest of these is the rapid increase in threats related to cybercrime and cyberterrorism. Bearing this in mind, IT security (cyber security) is of the utmost importance and requires constant upgrades and overhauls, especially for companies and banks. Experts in this field estimate its growth at around 10% annually. One of the leading providers in the field of IT security is Palo Alto Networks.

The fund Raiffeisen-HighTech-ESG-Aktien exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.