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Stocks to benefit from the coming AI, IoT boom

PC Lee
PC Lee8/16/2018 12:01 PM GMT+08  • 2 min read
Stocks to benefit from the coming AI, IoT boom
SINGAPORE (Aug 16): Internet of Things or IoT is on the verge of becoming a mainstream technology, reaching its tipping point next year after which adoption will accelerate among the masses, says DBS Group Research.
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SINGAPORE (Aug 16): Internet of Things or IoT is on the verge of becoming a mainstream technology, reaching its tipping point next year after which adoption will accelerate among the masses, says DBS Group Research.

In a Thursday report, DBS believes the advent of IoT would provide a much-needed boost for the development of Artificial Intelligence with billions of IoT devices creating ample data to feed AI systems.

“IoT would change the dynamics of competition from discrete products to product ecosystems, leading to the emergence of a few leading players at the cost of others in many industries,” says lead analyst Sachin Mittal.

Rapid adoption of IoT would also offer consumer companies access to customer usage data, which is currently limited to a few Internet companies.

Better still, Asia is expected to lead in IoT adoption with the region on track to becoming a global hub for AI developments, backed by Smart City initiatives, says Mittal.

As of 2017, 36% of Asian enterprises had adopted IoT solutions versus 29% globally.

By 2021, Asia is expected to account for 48% of global IoT share, with projected spending on IoT exceeding US$500 billion ($688 billion).

Among the key beneficiaries of this IoT and AI surge will be US-listed Chinese Internet giant Alibaba whose differentiated online ads should allow the e-commerce giant to improve its Gross Merchandise Value (GMV) monetisation rate leading to 24% earnings CAGR over FY18-20F.

HK-listed AAC is also expected to benefit from continuous smartphone feature upgrade in acoustics, haptics, and optical solutions for IoT applications which should drive 24% earnings CAGR over FY17-19.

On home turf, ST Engineering is a good bet as the engineering company aims to more than double smart city revenues by 2022, offering earnings CAGR of 6% over FY17-19.

India has three companies. In Bangalore, IT services company Mphasis offers 19% earnings CAGR over FY18-20F due to anchor clients like HP and Blackstone as digital revenues accounting for 40% of total revenue.

The other is Mumbai-based L&T Infotech which is set to benefit from large contract wins and significant digital revenue leading to 21% earnings CAGR over FY18-20F.

Yet another company is HCL Tech in Noida, Uttar Pradesh, whose deal wins, R&D investments and 27% digital revenue contribution should lead to FY18-20F earnings CAGR of 8%.

Year to date, shares in ST Engineering are down 0.6% at $3.27.

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