2017: The Year of Automation
While we locked in some impressive gains in Breakthrough Tech Profits last year, 2016 was generally a tough one for technology investors. After taking some big swings over the course of the year the Nasdaq Composite managed to gain just 7.5%, compared to a 13.4% jump for the Dow Jones Industrials. I expect 2017 to be much kinder to tech investors, so don’t let last year turn you off on the sector.
One of the reasons 2016 wasn’t a great year for tech was business spending was essentially flat last year—few were willing to make any sizable investments with all the uncertainty in the world. More than a few pundits have been predicting another recession and that tends to make businesses antsy about spending. Then you had the Brexit, uneven global economic growth and our own fractious elections.
But the economy is looking up. U.S. economic growth was stronger than expected in the second half of the year, manufacturing seems to be on an upswing and consumer spending is rising. Businesses spend when the economy is healthy and economists are predicting as much as a 3% to 4% increase in business spending this year. I predict given businesses are behind on their tech investments, and given the advancements that have been made, a lot of that spending will go into technology.
I think automation will probably be the biggest beneficiary, but I use the term automation broadly. I’m not just talking about the machines that build things, but the technologies that also enable control those machines, like artificial intelligence (AI).
AI is defined as machines that can recognize a set of conditions, then make a decision. Self-driving cars are probably the best example of that: they use data from hundreds of sensors to recognize and avoid hazards, and to stay on course. Thanks to machine learning, many AI platforms also have the ability to sift through the data they collect to make better decisions in the future. So AI, coupled with machine learning, has the potential to radically alter not only the way we drive, but the way we work.
We’re already seeing those trends at play. Ford Motors (NYSE: F) recently announced that instead of building its new electric cars in Mexico, it has opted for a facility in Michigan. And instead of employing 1,000 or more workers like an auto plant of the past, this facility will employ just 700. That’s automation at work since the plant will be using advanced robotics for the assembly work, with most of the people being skilled technicians to keep those machines running.
Ford won’t be the only manufacturer using the next generation of robotics in their production; I’d say it’s just the tip of the iceberg. So while technology generally will do well in 2017 as companies catch up on delayed spending like hardware and software platforms, the big winners will be companies working in AI and machine learning, and those that can integrate those technologies into automation.