Will AR Developments Turn 2021 Into The Year of Tech Stock Investment?

Yes, you've heard it all before: "The COVID-19 pandemic brought with it a level of disruption that very few people could have anticipated when drawing their predictions for 2020..."

My question is, with tech markets making remarkable gains, and further developments in augmented reality technology just around the corner, are we staring at a period of sustained success for the sector? 

It’s tricky to anticipate a global health crisis that would inadvertently accelerate our transition from office commutes to a remote work culture and the widespread digital transformation that’s impacted virtually all of our lives. 

The pandemic appears to have brought the future forward on an unprecedented scale. In April 2020, Microsoft CEO, Satya Nadella announced that the company had seen two years of digital transformation in two months. If such a rate continued, 2021 would be looking more like 2030 in the accelerated timeline of tech. 

(Image: Newsweek)

The industry has been further bolstered in 2020 by widespread investments - particularly from millennials who may be staring at some extra personal wealth in an era that’s free of expensive office commutes - in leading tech companies. 

With the arrival of vaccines and their rollout around the world, we may be looking forward to a future of the ‘new normal’ return to daily life, but could the momentum of tech stocks continue to gather pace as new developments in augmented reality come to fruition?

The Arrival of Augmented Reality

Significantly, the risks associated with travelling and the experiences from the first few months of the COVID-19 pandemic will lead to greater levels of demand for solutions that could generate greater employee and business efficiency while guaranteeing their safety. 

Augmented reality software providers will continue to update and enhance their offerings, alongside new features and more strategic collaborations to bring greater levels of support, automation and large-scale deployment while offering businesses greater analytical tools for insights and agile decision making. 

Although enterprise AR hardware may not undergo dramatic shifts due to current offerings serving value use cases, consumer hardware is likely to be considerably more dynamic. 

Eric Abbruzzese, AR/VR Research Director at ABI Research believes that this will be a significant year for the future of reality technology: “2021 will be an important one for AR consumer hardware. nReal will ship its first headsets to consumers, while Mad Gaze will also look to expand,” Abbruzzese explained. 

“Also, Facebook is expected to roll out its AR smart glasses out of its Reality Labs initiative; Google may join as well after the acquisition of North, and with pressure from Facebook and others. The total AR market, including content and usage on mobile devices, will be strong. Media & entertainment and retail & commerce will lead in terms of growth and adoption rates due to the establishment of ‘at home entertainment’ and the rise of online shopping.”

As major players in the world of tech look to acquire companies to develop their own entries onto the AR hardware market, we may well see their market position strengthened by their utilization of fledgeling technology. 

The Rise and Rise of Tech

As technology actively reshapes business and everyday life, this trend is continuing to be reflected in their performance in the stock market. With more investors planning out their long-term growth and protection against inflation and the volatility of current economic conditions, tech stocks continue to offer some potentially attractive opportunities for investors and they could help to influence the market’s overall performance. 

One example of a stock that could benefit largely from this market growth and the further development of augmented reality technology is Himax Technologies (HIMX), which rallied as demand for the company’s display drivers has rebounded. These display drivers regulate the colors shown by pixels on display screens and as a result of an exceptional 2020, the semiconductor specialist’s share value is up significantly over its 2019 performance. 

The third-quarter sales grew by as much as 46% year-over-year and its adjusted earnings per share rocketed by 281.6%. Although this earnings growth stems from a low basis of comparison, it’s still certainly been an impressive rebound. 

With augmented reality applications and 5G network support set to facilitate a new era of growth in mobile technology, Himax is likely to be an example of a beneficiary to the new screen and camera technologies that are soon to push the market forward. Development initiatives in AR may well become a catalyst for the stock itself, and it may be interesting to see how the company fares as these new developments in the technology become a reality. 

The Year of The Tech IPO

Alongside the significant growth of the tech industry, another somewhat unexpected trend for 2020 has been the explosion of IPOs entering the market. With more tech companies looking to expand on what has been a watershed year, initial public offerings have been cropping up at a rapid rate. 

(Image: Business Standard)

As we can see from the chart above, the 2020 IPO boom bears a remarkable resemblance to that of the dotcom boom of the late 1990s. 

In what’s already been a fruitful year for tech IPOs, the arrival of cloud data warehouse vendor Snowflake really underlined the power of initial public offerings in the current market. As it went public, the Californian company priced shares at $120 - up on its initial pricing of around $80. However, on its first day of trading, the share price leapt 111% to $245 per share - helping to raise $3 billion - the highest ever for a software firm at IPO. 

This managed to catapult the company’s value to $70 billion - nearly six-times its $12.4 billion valuation prior to the event. 

Although the rise of tech IPOs may bring greater levels of interest for investors, sadly much of this market is reserved for institutional investors. 

However, some retail investors may be able to utilize the services of companies like the Nasdaq-listed investment firm, Freedom Holding Corp. (NASDAQ: FRHC) - which enables users to participate in IPOs for certain listings through its subsidiary platform - Freedom24. However, this is subject to an application process and a threshold of at least $2,000 is needed.  

More traditional brokers like Fidelity and TD Ameritrade also offer IPOs to investors, though the threshold is typically considerably higher. For instance, with Fidelity, investors are required to have between $100,000 and $500,000 in household assets, while TD Ameritrade requires your account to hold a value of at least $250,000. 

The uncertainty of the COVID-19 pandemic may have prompted tech shares to rise exponentially, but the key question is whether this growth can be sustained in the era of the ‘new normal.’ However, with further innovations in the exciting world of augmented reality around the corner, the good times may continue to roll for publicly listed tech companies.