Business Disruption Opportunity or Risk?

Transcription

1 Brad Rutan, CFA Director, Investment Product Specialist MFS Investment Management Business Disruption Opportunity or Risk? The views expressed in this presentation are those of MFS and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any other MFS investment product Agenda Why is business disruption accelerating? Major shifts occurring in the global economy Changes in consumer behavior Changes in business behavior Artificial intelligence With these shifts come large shifts in profit pools Will create winners/losers Know what you own 2 1

2 % of population adopting technology % User Adoption 6/1/2018 When should you own innovators? "s Curve" Saturation Maturity Adoption Trial Use Understanding Awareness Contact Time 3 Why is disruption happening on such a large scale? Steeper "S Curves" Source: CLSA, as of 12/28/

3 Why is disruption happening on such a large scale? Adoption rates accelerating for technology Years until use by 1/4 of US population Facebook Internet Mobile phone PC Television Radio Telephone Electricity Years until use by 1/4 of US population Source: Citi Global Perspectives & Solutions "Disruptive innovations II" published July 2015 (latest data available) 5 Why is disruption happening on such a large scale? Population of digital natives exploding Source: HSBC. A digital native is defined as someone that has spent their entire secondary education age onwards in a country where the internet saturation rate is above 50%. 6 3

4 # transistors on a processor 6/1/2018 Why is disruption happening on such a large scale? Computing power is exploding 10,000,000,000 1,000,000,000 Moore's Law Intel Xeon Phi Processor 100,000,000 Intel Itanium Processor 10,000,000 Intel Pentium Processor 1,000, ,000 Intel ,000 Intel , Source: Intel as of 12/31/16. 7 Smartphone penetration has surged but growth slowing Source: Kleiner Perkins / Morgan Stanley Research May

5 Advertising 45% 40% 35% $20B 30% 25% $16 20% 15% 10% 5% 0% Print Radio TV Desktop/laptop Mobile US time spent US ad dollars spent Source: Magna Global, emarketer. As of 6/30/ Media/Advertising Sources: Kleiner Perkins May 2017 /bnewzoo Global esports Market Report (2/17), Newzoo press release (1/16), Newzoo Casual Connect Europe Presentation (2/15) 10 5

6 Media/Advertising 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Popularity of esports vs. traditional sports is growing 13% 27% 21% 13% 13% 13% 45% 27% 34% 15% 11% 13% 18% 20% 19% Millenials Non-millenials All responses No preference Slightly prefer favorite traditional sport Significantly prefer favorite traditional sport Slighlty prefer favorite esports Significantly prefer favorite esport Source: L.E.K 2017 Sports Survey (February 2017) 11 Brick and mortar retailing 9.00% E-Commerce Share of Total Retail Sales 1998 Through % 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Source: US Census Bureau, Comscore, Empirical Research Partners Analysis. 12 6

7 Total public cloud markets (US$B) 6/1/2018 Brick and mortar retailing Country Shopping Center GLA (sq ft) Population (millions) GLA per capita U.S. 7, Canada U.K France Italy Spain Germany Source: ICSC September 2015 (latest data available). 13 The IT stack: compute, storage, service E 2018E 2019E 2020E BPaaS SaaS PaaS IaaS Source: Forrester Research. Most recent data available. ("E" denotes estimates) As-of 9/1/2016 BPaaS: Business Process as a Service, SaaS: Software as a Service, PaaS: Platform as a Service and IaaS: Infrastructure as a Service 14 7

8 The IT stack: compute, storage, service Sources: CLSA / IDC, as of 12/31/15 (latest data available), forecast Pharmaceuticals 80 Global sales of biologics/biosimilars E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E Brand biologics Biosimilars Source:. Citi GPS: Global Perspectives & Solutions, July 2015 Estimates for 2016 to

9 Autos Market size ($billion revenue) Semis PCs Handsets Autos Auto Suppliers Sources: Bernstein "Global Energy Storage & Electric Vehicles" paper. February Strategy Analytics, Gartner, IDC, Bloomberg, Bernstein. 17 Autos Traditional car Steal Aluminum Plastic Auto parts ECU Engine Traditional car OEM Value Dealers Dealers OEM Oil Changes Electric Vehicle Lithium Graphite Cobalt Nickle Battery components Value Battery Semiconductors Traditional car OEM New players Dealers/ Direct sale Autonomous Electric Vehicle Battery components Value Battery Semiconductors Sensors Traditional car OEM New players Dealers/ Direct sale ADAS-software AI-Learning Mobility Appsi.e. Uber Value Sources: Bernstein "Global Energy Storage & Electric Vehicles" paper. February

10 Revenue (in millions) 6/1/2018 Artificial intelligence Recent data growth necessary for artificial intelligence Every year, 50% digital data growth Every minute, 200 million s sent 2 million Facebook posts 3 million Google searches 60 trillion webpages Digital Data Worldwide Source: Google; Kevin Kelly, The Inevitable (published 2016). 19 Artificial intelligence We expect to see an explosion of AI generated revenues $40,000 Artificial Intelligence Revenue, World Markets: $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $ e 2018E 2019e 2020e 2021e 2022e 2023e 2024e 2025e Source: Tractica as of latest data available (2/28/17). Years are estimates

11 Artificial intelligence Artificial intelligence could dramatically boost productivity Potential boost to productivity of labor from artificial intelligence Spain Italy Belgium France United Kingdom Netherlands Germany Austria Japan United States Finland Sweden 0% 5% 10% 15% 20% 25% 30% 35% 40% Source: Accenture Institute for Higher Performance, in collaboration with Frontier Economics. Report dated 9/28/ Artificial intelligence Artificial intelligence could dramatically boost growth Annual growth rates by 2035 of gross value added (a close approximation of GDP) % Basline AI steady state Source: Accenture Institute for Higher Performance, in collaboration with Frontier Economics. Report dated 9/28/16. Chart compares baseline growth by 2035 to an artificial intelligence scenario where AI has been absorbed into the economy 22 11

12 Artificial intelligence Breadth and depth of companies investing in AI is exploding The breadth of industries investing in artificial intelligence is exploding (number of companies working with NVIDIA on deep learning) Source: Jefferies research report on technology dated February 6, "If you don't like change you will like irrelevance even less." -General Eric Shinseki 24 12

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