Citi Global Wealth UNSToPPABLe TreNDS | | 65 Investments Investing in digitization was tough in 2022. Despite recent performance, though, the digital Given our view, we do not see the selloff in Equities relating to the likes of fintech, cloud revolution has not gone into reverse. Indeed, digitization assets in 2022 as reflecting the computing and semiconductors – FIGURE 1 – these technologies are becoming ever more sector’s prospects. Instead, it resulted from experienced sharp falls, alongside many other deeply embedded in how we live and work. aggressive interest rate hikes and the valuation growth-oriented assets. This marked a sharp In the years ahead, we expect intensifying frothiness that had previously accumulated. reversal from the lockdown period in 2020. innovation driven by well-funded research and Following the steep drop in valuations, we During that time, such investments soared as development. And we believe that businesses believe there may be opportunities to build long- businesses and consumers relied more than will have to either embrace new technologies term portfolio exposure to this transformative ever on digital technologies in response to tight and processes or face extinction. Put simply, theme. While we retain our conviction across restrictions on daily life. the unstoppable trend of digitization remains in digitization broadly, we highlight three areas full force. for consideration. FiGUre 1. DiGiTiZATioN’S vALUATioN DeCLiNe Semiconductors are Digitization theme EV/EBITDA (now vs November 2021) powering digitization Theme Nov 21 Now % Derating Semiconductors are the brains of the Payments 16.3 11.4 -29.9% digital revolution. e-commerce 16.0 11.4 -28.6% The little chips that store and process data S&P 500 14.3 11.9 -16.8% are all around us, enabling every digital task Metaverse 21.4 12.6 -40.9% however trivial or sophisticated. Indeed, Social media 20.8 12.7 -38.6% there is no aspect of the unstoppable trend of digitization – from cybersecurity to robotics to robotics 17.5 13.2 -24.7% artificial intelligence to the metaverse – that Fintech 24.1 13.9 -42.5% does not depend heavily on this technology. And Cyber security 23.1 16.2 -30.1% we envisage the role of semiconductors only Ai & cloud computing 32.7 17.4 -46.9% increasing further over the coming years. Healthcare tech 35.8 25.6 -28.5% The continued rollout of fifth-generation – or “5G” – data networks and thereafter 6G will see Source: Haver, as of 15 Oct 2022. Past performance does not guarantee future results. Investors cannot invest in an index. All forecasts are billions of devices connected to the internet for expressions of opinion, are subject to change without notice and are not intended to be a guarantee of future events. See Glossary for definitions. the first time ever and a vast increase in data Table shows valuation multiples - enterprise value (market capitalization plus debt) divided by earnings before interest tax depreciation and produced – see 5G and beyond: Connection to amortization) - for a selection of sub-themes within digitization, comparing levels in November 2021 with those a year later. Sub-themes: the future in Outlook 2022. e-Commerce: Solactive E-commerce Index; Payments: Prime Mobile Payments Index; Metaverse Ball Metaverse Index; Robotics: ROBO Global The upsurge in connectivity that we expect will Robotics and Automation Index; Social media: Solactive Social Media Total Return Index; Fintech: Indxx Global FinTech Thematic Index, Cyber security: Nasdaq CTA Cybersecurity Total Return Index; AI & cloud computing: Indxx Global Cloud Computing Index; Healthcare tech ROBO Global require semiconductors to be incorporated into Healthcare Technology and Innovation Index. everything from mundane household objects to the smart cities and autonomous vehicles of