Five innovations for investors to watch in Q1

Oksana Patron

23 January 2023

Renewables accessing deeper waters, acceleration in artificial intelligence (AI), space economy, Alzheimer’s medication trials and collapse of cryptocurrency are among key innovations to watch this quarter according to asset manager, Franklin Templeton.

In its Innovation Insight, Franklin Equity Group said investors, often busy with following the macro-level uncertainties, needed to be reminded that the pace of acceleration was accelerating and would translate into significant value for the economy.

Matthew Moberg, portfolio manager, Franklin Equity Group, pointed to the largest floating wind farm harnessing offshore wind potential in deeper water as one of such themes and opportunities.

“The transition to carbon-free and less carbon-intensive energy will take many forms, and floating wind farms represent one way the world will move toward carbon-neutral generation as the global power grid becomes increasingly complex,” he said.

“We expect fossil extraction companies to be early adopters of many new technologies as they have the capital, institutional knowledge, and desire to generate clean emissions.”

Following this, artificial intelligence (AI) is expected to continue to find new use cases including creating images directly from text.

The manager noted that the AI was trained with images and accompanying descriptions and  appeared to understand the relationship between objects and actions, and the model could extend images beyond their original boundaries, making realistic edits and creating new variations of the image in a requested artistic style.

“AI continues to demonstrate novel creative capabilities by leveraging the exponential growth of data to train machine-learning models. Yes, the images are a bit silly, but in time they may be used in surprising ways, such as in the medical field for x-ray verification, facial or ocular recognition, or combined with the latest AI-based chat to produce superior query results,” he added.

At the same time, space travel would remain a frontier, with private companies driving innovation, and the anticipated emergence of industries that would capitalise on the reduced barriers to access space and the lunar surface.

Moberg said that NASA’s Artemis 1 mission launched an uncrewed capsule to fly around the moon, representing the first crew-capable flight by NASA in almost 50 years, and the purpose of the program was to return astronauts to the lunar surface by 2025, and eventually put boots on Mars, with the United States is revitalising its space program by adding capital and technology to the “space economy.”

On another front, treatment for Alzheimer’s was also on top of the list of one of the most clinically unmet needs in medicine that had baffled scientists for decades.

“Alzheimer’s disease is the most common form of dementia, affecting over 44 million people worldwide, and remains one of the biggest unmet needs in medicine,” the manager said.

“Now low-cost blood tests on the market, measuring tau and amyloid beta proteins, can help doctors provide an earlier diagnosis. Combined with a new generation of medications to slow cognitive decline, patients can maintain their level of brain function for a longer time. Research on a handful of medications continues to work through clinical trials, but hurdles remain at each step for safety and efficacy in preserving cognitive function.”

Finally, the collapse of cryptocurrency exchange illustrated limited systemic risk to traditional financial system.

“Despite a significant devaluation of cryptocurrencies and digital bank runs on various crypto exchanges, the limited impact to the traditional financial system suggests the technology has not been disruptive and decentralised finance applications remain in a nascent stage,” Franklin’s portfolio manager stressed.

“The collapse of FTX, the second largest exchange of cryptocurrency, shows how the lack of regulatory guardrails for a new technology can enable malfeasance on an unprecedented scale.

“As the bankruptcy court works through the process of unwinding the company, it is clear the technology, hailed as disruptive, has so far had limited impact beyond cryptocurrency speculation. The cryptocurrency asset class’s 72% drawdown from a high of US$3 trillion has not demonstrated contagion risk to the traditional banking system.”