Every day, the media seems to promote a hot new trend for investors to chase. Cryptocurrencies, NFTs, SPACs, and other buzzy terms frequent the headlines with jargon and lofty promises.
Investors might profit from some of those trends, but there are other markets that are more resilient and easier to follow. Let's review three of them and see why they could be great investing opportunities.
1. The fintech market
The fintech market includes digital-payment platforms, online banking and wealth management services, and some cryptocurrency trading platforms. This sector continues to expand as people use less cash, shop online more frequently, and rely less on traditional banks.
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Businesses are also starting to recognize the value of streamlining their payment services, integrating those tools into their mobile apps, and using analytics to track customer purchases and trends. Allied Market Research expects the global mobile payment market to expand at a whopping compound annual growth rate (CAGR) of 30.1% between 2020 and 2027 to become a $12.06 trillion market.
Companies that could profit from that expansion include PayPal (NASDAQ: PYPL), which provides online-payment services to 377 million accounts, and Square (NYSE: SQ), which processes payments for merchants and offers consumers peer-to-peer payments, Bitcoin purchases, and free stock trades through its Cash App.
2. Artificial intelligence
The artificial intelligence (AI) market is often associated with intelligent robots but its reach is actually much broader. AI services are now used to crunch data for social networks and advertising platforms, process large amounts of information to help companies make decisions, and control machines and vehicles.
Image source: Getty Images.
They can power chatbots to streamline a company's customer-support services, optimize a company's supply chain by identifying inefficiencies, and improve safety standards by spotting hazards.
The global AI market grew into a $39.9 billion market in 2019, according to Grand View Research, but it could still expand at a CAGR of 42.2% between 2020 and 2027.
My top picks in this market include NVIDIA (NASDAQ: NVDA), which provides high-end GPUs for processing AI tasks in data centers, and Palantir (NYSE: PLTR), which collects and processes data for government agencies and enterprise customers.
3. Virtual and augmented reality
The virtual reality (VR) and augmented reality (AR) markets are still tiny but both have explosive growth potential.
VR devices, which immerse users in digital environments, could be used for more video games, simulations, and even remote socialization. Facebook's Oculus VR enjoys a first-mover's advantage in this market, and its headsets could expand Facebook's ecosystem beyond PCs and mobile devices.
AR devices, which project digital images on real-world environments, can be used as heads-up displays for certain professions or entertainment, navigation, and communication tools for mainstream consumers.
One company worth watching in this market is Vuzix (NASDAQ: VUZI), which mainly sells AR smartglasses to enterprise customers. It's still a small company but enjoys an early-mover's advantage in the AR space, and could continue to expand as more companies try out AR glasses.
The global VR and AR markets could expand at a CAGR of 42.9% between 2020 to 2030, according to Research and Markets, and become a $1.27 trillion market. That bullish forecast suggests VR and AR devices could become the next big computing platforms after smartphones.
Look before you leap
Spotting these secular trends is a good first step toward finding great growth stocks, but investors should still do more homework and split the more speculative investments from the conservative ones.
For example, PayPal is a more conservative investment than Square, since it's trading at much lower valuations and isn't heavily dependent on revenues from Bitcoin trades. Palantir is pricier, more speculative, and more controversial than NVIDIA, and Vuzix could still face tough competition from tech giants like Apple as they enter the nascent AR market.
That said, understanding these companies and their secular tailwinds can give investors a better grasp of the tech sector than simply chasing the financial media's hippest investing trends.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Apple, Palantir Technologies Inc., and Square. The Motley Fool owns shares of and recommends Apple, Bitcoin, Facebook, NVIDIA, Palantir Technologies Inc., PayPal Holdings, and Square. The Motley Fool recommends the following options: long January 2022 $75.0 calls on PayPal Holdings, long March 2023 $120.0 calls on Apple, and short March 2023 $130.0 calls on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.