Australia has witnessed 27 consecutive years of economic growth, and Australia technology investing is on the rise. Here’s an overview.
The Australian tech sector is growing quickly as it continues to attract international attention.
According to CSIRO, the Australian economy is home to esteemed institutions, public systems and employment opportunities, making it ripe for investment and attracting tech talent. To that end, Australia has experienced an unprecedented 27 consecutive years of economic growth.
PwC reports that between 2012 and 2017, information and communication technology exports reached US$3.2 billion, rising at a 60 percent uptick.
Yet despite this growth, the tech sector in Australia is largely overshadowed by the nation's other export industries. Largely dependent on resources and commodities, eight out of 10 Australian exports relate to energy, agriculture or minerals.
In light of these demands, the Australian government is working with technology companies to increase efficiencies in the agriculture, biofuels and cleantech industries. For example, Digital Agricultural Services, an agricultural startup, is a company that has created software that tracks land yield and water systems and monitors rural land.
Amfora, on the other hand, is an Australian tech company that is developing innovation in creating livestock feed with new vegetable oil extraction methods.
Looking over at other verticals within the Australian tech market, several companies are driving innovation in artificial intelligence (AI), esports, renewable energy and fintech.
Notably, some US companies are seeking out investment opportunities in Australian tech stocks. Salesforce (NYSE:CRM) and Cisco (NASDAQ:CSCO) have invested millions in Australia's tech sector to take advantage of the opportunities in the market. For its part, Google (NASDAQ:GOOG) is partnering with Australia's Lendlease in a US$15 billion deal.
With international interest accelerating in Australia's growing tech sector, here's a look at the different ways to invest in it and an overview of the future outlook for the industry.
Australia technology investing: Stocks
There are a number of technology stocks listed in Australia that have witnessed strong gains this year.
As of midway through 2019, the companies below were the top performers year-to-date, according to CRN. All stocks listed had market caps between AU$10 million and AU$500 million at that time.
- Uniti Wireless (ASX:UWL): Uniti Wireless is a broadband and wireless service provider founded in 2012. The company launched its IPO on February 13, 2019.
- 5G Networks (ASX:5GN): Tech and telecom company 5G Networks implements cloud solutions through its 5GN platform, targeting commercial clients to adopt cloud security, backup and technical support solutions.
- Rhipe (ASX:RHP): Rhipe is a company that helps businesses adopt cloud systems. Its cloud services include workforce outsourcing and cloud subscription licensing programs such as Microsoft (NASDAQ:MSFT) Dynamics.
- Cirrus Networks Holdings (ASX:CNW): Founded in 2003, Cirrus Networks Holdings is an IT consulting firm focused on disruptive technology, risk reduction and backup solutions. Its strategy services include developing Internet of Things tactics and honing data analytics within a full-circle data management lifecycle.
- Kogan.com (ASX:KGN): Online marketplace company Kogan.com casts a wide net across a number of retail, mobile, travel and insurance offerings. New vertical expansions in health and pets are projected for the future.
Australia technology investing: ETFs
A total of AU$16 billion was invested in Australian exchange-traded funds (ETFs) as of April 2019. The ETFs below are listed on the ASX, and they provide exposure to tech companies around the world.
- ETFS Robo Global Robotics and Automation ETF (ASX:ROBO): Tracking the ROBO Global Robotics and Automation Index, this ETF invests in AI and robotics companies that have market caps over AU$200 million. Founded in September 2017, this ETF has a 0.69 percent management fee and 89 holdings. Among its top holdings are Hiwin Technologies (TPE:2049), weighted at 1.8 percent; NVIDIA (NASDAQ:NVDA), weighted at 1.8 percent; and Yaskawa Electric (TSE:6506), with a 1.7 percent weighting.
- BetaShares Global Cybersecurity ETF (ASX:HACK): Requiring no minimum investment, the BetaShares Global Cybersecurity ETF has a 0.67 percent management fee and 44 holdings. It has been in operation since August 2016. The ETF tracks the NASDAQ Consumer Technology Association Cybersecurity Index, providing exposure to global cybersecurity companies. Its top holdings include Splunk (NASDAQ:SPLK), weighted at 6.5 percent; Okta (NASDAQ:OKTA), with a 6.3 percent weighting; and Palo Alto Networks (NYSE:PANW), weighted at 6 percent.
- ETFS Morningstar Global Technology ETF (ASX:TECH): Tracking the Morningstar Developed Markets Technology Moat Focus Index, this ETF has a 0.45 percent management expense and has 34 holdings. Founded in August 2017, it is an equal-weighted ETF that provides exposure to tech stocks around the world. The index specifically is composed of companies that have good price-to-fair-value ratios. The top holdings of this ETF include Lam Research (NASDAQ:LRCX), KLA (NASDAQ:KLAC) and Facebook (NASDAQ:FB), which all have 4.4 percent weightings.
- Global Robotics and Artificial Intelligence ETF (ASX:RBTZ): Providing exposure to companies focused on AI and industrial robotics sectors, the Global Robotics and Artificial Intelligence ETF has a 0.47 percent management fee and 35 holdings. Originating in September 2018, this ETF tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index with no minimum investment required. Among the highest-weighted companies in this ETF are NVIDIA at 7.7 percent, Mitsubishi Electric (TSE:6503) at 7 percent and Intuitive Surgical (NASDAQ:ISRG) at a 6.8 percent weighting.
- Battery Tech and Lithium ETF (ASX:ACDC): The Battery Tech and Lithium ETF is the first ETF in Australia to track the energy storage and production sector. Since August 2018, this ETF specifically has tracked the Solactive Battery Value-Chain Index, which focuses on lithium, battery metals and battery storage companies. With 29 holdings, this ETF has an expense ratio of 0.69 percent. Top holdings in this ETF include NEC (TSE:6701) at 4.1 percent, Sony (NYSE:SNE) at 3.8 percent and FMC (NYSE:FMC) at a 3.7 percent weighting.
Australia technology investing: Future outlook
According to a report published by the Australian government, technology is set to have a pronounced impact across multiple industries in the country.
The mining industry, for example, is anticipated to benefit from digital advancements through the use of 3D printing technology, which will enable the production of spare parts on demand. Agriculture will continue to benefit as yield technology is employed at higher rates and as blockchain technology is integrated into supply chain processes.
Government support for a more adaptive education system will be central to these advancements as the sector changes rapidly and unpredictably. Small- and medium-sized business adoption will be key as well. Current barriers to tech adoption include lack of skills, poor internet access, cost and time.
The government is working with the tech industry to counter these roadblocks and strengthen the sector through introducing its National Broadband Network at affordable prices, among other policy initiatives.
Underpinning future growth, PwC notes, will be the development of a sophisticated tech workforce.
The demand for skilled workers is projected to reach 758,700 by 2023, and the cross pollination of tech and other major sectors is providing new opportunities for growth and advancement to create a sustainable advantage in the global economy.
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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.