Sheryl Sutherland says although it's not really possible or realistic for investors to pick the next big thing, identifying promising sectors can be worthwhile

By Sheryl Sutherland*

“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

Warren Buffet

Investors are always looking for the next big thing, it is an inherent part of our nature – it is how the human race developed after all. We want to be investing on the ground floor of the next Amazon, Nvidia or Google – companies which are disruptive, change society, and deliver substantial returns.

Bad news; as an investor you are unlikely to identify one. The best you can do is look at the sectors which show growth potential, are innovative, and resilient to economic cycles. The sectors poised for growth over the next decade will include emerging technologies and take on market trends. The Conversation.com suggests that a sector is poised for growth when it demonstrates the following:

• Consistent expansion in market size, demand or revenue,
• A surge in venture capital, public market interest or IPO activity signalling positive investor sentiment,
• A significant rise in hiring and demand for specialised skills within the sector,
• A notable increase in consumer interest or notable shifts in consumer behaviour toward the sector's offerings,
• A rise in M&A activity that often signals market share consolidation or strategic expansion,
• Supportive legislation, favourable policy changes and new tax incentives to foster growth,
• The entrance of new players or expansion by existing companies within the sector,
• Growth in international markets or the formation of global partnerships,
• Technological innovation and breakthroughs that can open up fresh growth avenues.

Based on these factors, it suggests that the following are sectors likely to experience transformative growth over the next decade:

1. Artificial Intelligence (Al)
Artificial Intelligence (AI) will drive the growth narrative forward over the next decade. This is reinforced by a decisive shift in US AI policy, with President Trump announcing a US$500 billion AI infrastructure project dubbed "Stargate" to build data centres and computing infrastructure for AI development.

The AI market is estimated to top a trillion dollars in value by 2030, up from US$197 billion in 2023. Consulting firm McKinsey estimates that AI software and services alone could contribute up to US$23 trillion in annual economic value to the US by 2040. For perspective, the US GDP was around US$29 trillion for the third quarter of 2024. With GDP typically growing at a rate of 2.5-3% annually, Al's potential to accelerate growth lies in its ability to boost productivity, accelerate product development and shorten innovation cycles. AI will not only stimulate industry expansion but also fuel consumer demand through improved personalisation.

Catalysts for AI growth include advancements in machine learning and deep learning, as well as breakthroughs in Natural Language Processing (NLP). AI will fuel automation, revolutionise healthcare by reducing costs, enable autonomous vehicle systems, and drive personalisation across industries. The expansion of cloud and edge computing will further accelerate AI adoption.

2. Cloud Services
Despite the rapid growth over the past decade, cloud services have plenty of untapped potential due to under-penetration of the market. Even as businesses continue to shift from traditional computing and storage models to cloud-based solutions, a 2023 survey found that enterprises with annual revenues topping US$1 billion had only around 20% of their workloads currently hosted in the cloud. However, the majority of these companies plan to more than double this share by 2026.

The ability to bring compelling value to enterprises migrating to the cloud should continue to drive growth in cloud services over the next decade. According to McKinsey, cloud services are projected to generate US$3 trillion in EBITDA increases for Forbes Global 2000 companies by 2030, by digitising core operation, and accelerating product development. This clearly represents a value proposition. Cloud services revenues are projected to increase from US$220 billion in 2022 to between US$1.6 trillion and US$3.4 trillion by 2040.

3. Health Care
The health care sector is teeming with growth prospects, thanks to the quest for better treatments and more affordable patient care. From developing treatments to streamlining administrative tasks in hospitals, AI will play a crucial role in shaping the health care sector.

The multi-pronged growth in the health care sector would include advancements in telemedicine and remote healthcare (virtual consultations and remote patient monitoring), personalised and precision medicine (tailored treatments based on genetic data, lifestyle and environmental factors), health monitoring and proactive care via wearables, gene editing (technologies to alter genes within living organisms to cure genetic diseases and enhance biological traits - a slightly controversial area requiring stringent regulations and ethical considerations but brimming with explosive potential),
digital health data platforms, and regenerative medicine that holds the promise of healing, replacing or regenerating
tissues and organs rather than just managing diseases - but also requires careful regulatory navigation.

4. E-commerce
The growth in e-commerce will be tied to immersive shopping experiences, growing internet penetration in emerging nations and category expansion in developed nations. Retail e-­commerce (including food e-commerce) reported revenues of US$4 trillion for 2022 or around 24% of global retail revenues. This is estimated to grow to US$14-to-US$20 trillion or 34% to 47% of global retail sales by 2040.

Retail e-commerce will continue to grow in emerging economies, such as Latin America, Asia and Africa as internet adoption rises in these regions amid expansion of the middle class. In 2022, retail e-commerce represented just 12% of total retail sales in Latin America, 4% in the Middle East, and 2% in Africa. By 2040, e-commerce is estimated to account for 26% to 29% of total retail sales in Latin America, 15% to 20% in the Middle East, and 10% to 15% in Africa.

For shoppers seeking hands-on-experience and enhanced product visualisation, Virtual Reality (VR) and Augmented Reality (AR) integrated into the shopping experience will be powerful tools for making informed buying decisions. Other enablers include AI-driven personalised shopping recommendations, influencer and review-oriented social commerce (which allows direct shopping through social media apps), and omnichannel retailing (or the increasing convergence of online and offline channels like ordering online and pickup in store). Quicker and cheaper shipping could also be
a key catalyst.

5. Digital Payments
The digital payments landscape will get a boost from globalisation, increased smartphone usage, e-commerce growth and online shopping. Wide adoption of digital wallets like Google Pay clearly indicates consumer preference for convenient, fast, seamless and secure digital payment solutions. Financial inclusion will act as a major catalyst, especially in regions with limited or without traditional banking infrastructure. Cross-border transactions will further accelerate the adoption of digital payments, amid an increasing number of businesses having an international presence and consumers shopping internationally. The integration of the Internet of Things (IoT) will significantly automate digital payments. IoT-enabled devices, such as smart appliances, wearables, connected vehicles and even smart homes, will be capable of initiating payments autonomously. For instance, a car could automatically process payment for fuel at the gas station, or a refrigerator could place and pay for grocery orders when it detects that supplies are running low.

6. Cybersecurity
Cybersecurity is set to evolve from a reactive to a proactive function over the next decade as organisations strive to safeguard their data, assets and reputation from increasingly sophisticated cyber threats.

Digital transactions will grow and transform exponentially. The cybersecurity industry's revenues are estimated to grow from US$160 billion in 2022 to between US$590 billion and US$1.2 trillion by 2040. The share of all IT spending devoted to cybersecurity could grow from 6% in 2022 to an estimated range of 7% to 14% by 2040.

7. Agritech
Agritech, which focuses on developing smarter and more sustainable food production solutions, is poised for significant growth over the next decade. This growth will be driven by the confluence of powerful trends, including the surge in global food demand fuelled by a rapidly growing population, and the urgent need for innovative farming techniques to reduce waste, conserve water and minimise environmental footprints in the face of climate change and resource depletion. From precision farming that leverages technology to improve the efficiency and sustainability of crops and
livestock, to vertical agriculture, where plants/crops are grown in stacked layers for more efficient land use in urban areas, agritech appears to be getting love from both governments and venture capitalists. This sector effectively addresses the twin challenges of increasing yields while using fewer resources and reducing environmental impact.

The Bottom Line

Identifying growth stocks and sectors for the next decade is a complex challenge, requiring both a deep understanding of emerging trends and the ability to anticipate unforeseen disruptions. For instance, the COVID-19 pandemic thrust remote conferencing technologies into the spotlight, driving growth in work-from-home and telemedicine sectors.

A truly promising growth sector is one that not only remains relevant in the face of change and challenge but is also strategically positioned to capitalise on future innovations and evolving market demands.

*Sheryl Sutherland is director of The Financial Strategies Group, and author of Girls Just Want to Have Fund$ – Every Women’s Guide to Financial Independence, Money, Money, Money Ain’t it Funny – How to Wire your Brain for Wealth, and co-author of Smart Money – How to structure your New Zealand business or investments and pay less tax. You can contact her here.