Technology is not just a short-term trend but a long-term evolutionary force, argues Matt Cioppa, Portfolio Manager of Franklin Technology Fund
As we move through 2025, technology continues to stand at the forefront of global change, offering unprecedented opportunities across industries. Franklin Templeton’s technology team based in Silicon Valley believes that the future of technology is not just about new gadgets and software, but about a profound digital transformation that will redefine how businesses operate, how economies grow, and how we interact with the world around us.
We see technology as a driving force that transcends the typical market cycles. From Artificial intelligence (AI) and machine learning to blockchain, cloud computing and the internet of things, the technologies shaping the future are already beginning to make a lasting impact on all industries.
Our experience over the past 25 years has taught us that when forecasting new markets, investors often underestimate exponential growth curves. For instance, during the early days of cloud computing, there was significant doubt that cloud would proliferate across large corporations, but relentless innovation and scale enabled the cloud providers to fully capture this opportunity, leading to years of hypergrowth, margin expansion, and great outcomes or technology investors. Other foundational technology cycles of the past also taught us that a focus on quality, not just growth, is essential. In the mobile computing era, the companies best able to deliver higher returns over the long run exhibited distinct quality attributes like visionary leadership, platform lock-in, and differentiated intellectual property. Today, these learnings help frame our perspective on AI. Like in the early days of both cloud and mobile, the market has expressed uncertainty about the durability of AI as an exponential growth vector. However, experience, and the many parallels to early cloud and mobile computing, have taught us to maintain our conviction and identify businesses that exhibit the best growth and quality attributes.
We’ve also learned that in technology investing, volatility comes with the territory. The MSCI World Information Technology index has experienced at least one correction in 20 of the last 25 years, but that has not stopped its meaningful outperformance versus the broader market. Recent market volatility has created compelling opportunities for long-term investors to own the exponential growth potential of high quality, innovation-led technology companies at more compelling valuations.
Looking forward, we are particularly excited about AI, quantum computing and robotics, which together can usher in the “intelligence age.” Just as the industrial revolution transformed agrarian societies, and digital technology created our connected world, embedded intelligence will likely accelerate innovation, productivity, and potentially solve previously intractable problems from disease to resource constraints. There will undoubtedly be bumps along the way, but long-term technology investors should not lose sight of the abundance of opportunity ahead.
Franklin Templeton’s outlook for the tech sector going forward is driven by its belief that technology is not just a short-term trend but a long-term evolutionary force. As businesses continue to navigate a rapidly changing digital landscape, the ability to adapt and innovate will be the key to success. It’s about identifying those companies that are not only positioned to succeed in the short term are also driving innovation that will shape the future for years to come.
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