Investing in the Future: How to Profit from the Growing Digital Economy MegaTrend

By: November 16, 2023

We all know the term digitalization, and we all experience it. Things are moving to the digital world, whether it comes to how we’re doing business – emails have long replaced letters, for example – or whether it’s how we communicate and interact with friends and family. 

Intelligent City | Digital Economy | Huawei Enterprise

(source https://e.huawei.com/de/ict-insights)

Digitalization not only results in changes in how established businesses are communicating, but the MegaTrend of digitalization also has resulted in the creation of entirely new industries. 

And it has reached into every aspect of our modern lives. What’s more, it’s going to continue to grow, as every device becomes smarter and, in many cases, autonomous. 

The best news for investors – we’re only in the beginning stages of this massive MegaTrend.

Meta and Others Are Driving This Trillion-Dollar MegaTrend

In the 1990s, Don Tapscott, a business executive and author, wrote a book called The Digital Economy: Promise and Peril in The Age of Networked Intelligence

So, the term Digital Economy isn’t especially young, but it has filled in more and more space in our daily lives in recent years. 

The term describes what we see around us everywhere: Many different types of business processes have moved to the online and digital world. This includes online shopping, social media, and social media advertising, how we consume TV shows and other media, and even things such as how we inform ourselves about and apply for jobs.

And this trend is massive, as the following graph shows:  

A graph of sales in the united states

Description automatically generated

(Source: statista.com)

E-commerce has become a huge force when it comes to how people shop for things, with holiday season sales in the online world rising by around 150% between 2016 and 2022, and now coming close to a quarter-trillion dollars on a per-year basis – for the United States alone. 

We can differentiate between companies that are pure online companies and those that are more traditional but that use digital technologies as well. 

Amazon (NASDAQ: AMZN) and other e-commerce pure plays belong to the first group, which also holds true for online marketplaces such as Airbnb (NASDAQ: ABNB), while digital communication companies such as Meta Platforms (NASDAQ: META) with its Facebook, Instagram, and WhatsApp products belong to this group as well. 

Businesses that do many things in the offline world, such as manufacturers, can also benefit from the digital economy. Moving internal and external communication to the online world can make things faster and result in cost savings, for example. 

How To Profit from the Digital Economy MegaTrend

We can differentiate between several types of Digital Economy businesses. 

Infrastructure providers that are responsible for the backbones of the Digital Economy are one such group. These include the companies that operate data centers and that produce the chips that are necessary to process all the data. 

NVIDIA (NASDAQ: NVDA) belongs to this group, being a very fast-growing chip company with an edge in chips for AI data centers. But AMZN, with its AWS, and Microsoft (NASDAQ: MSFT), with its Azure cloud business, also belongs to the fast-growing infrastructure businesses of the digital economy.

Platform providers such as META will benefit from the ongoing growth of the digital economy as well. More and more users spend growing amounts of time on its social networks, and META finds more ways to monetize these users – by showing them advertisements from third-party companies that pay heavily, allowing these users to buy and sell items from each other, and so on. ABNB’s business and Uber’s (NASDAQ: UBER) can be counted here as well. 

There are many different ways to invest in the Digital Economy MegaTrend – going with the very entrenched, large, and dominant companies with a strong position benefiting from network effects that make them larger and larger is a wise choice. 

Interested in exploring MegaTrend investment strategies? Dive into our leading resource, Proffe’s Trend Portfolio. Celebrating its first year next week, this portfolio has outperformed the S&P 500 by over 5 times since its inception.


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