It's a cliche, but it's true: People tend to overestimate the changes major technologies and tech trends will deliver in the short-term, while underestimating what they'll deliver in the long-term.
With that in mind, it's best not to get carried away when predicting what will happen in the tech world over the course of 12 months, a fairly short period of time in the grand scheme of things. At the same time, just as the tech -- and tech investing -- landscape looks meaningfully different right now than it did at the start of 2019, it's safe to assume that some important changes will happen between now and the end of 2020.
Here are the first half of a set of 20 tech predictions for the next 12 months. My 2019 tech predictions (made in December 2018) can be found here and here, and recent reflections on those predictions can be found here and here.
1. 5G Goes Mainstream, But Has a Limited Impact on Smartphone Growth
5G phone sales were pretty limited in 2019, as high prices (often above $1,000) and limited network availability made consumers think twice about buying. The story should be quite different in 2020, as network coverage improves and Apple (AAPL) , Samsung and many others roll out flagship phones with 5G radios. Some mid-range 5G phones should also arrive (see Xiaomi's $285 Redmi K30 5G, which launches in China in January).
But while 5G adoption will undoubtedly jump in 2020 (and benefit many chip and equipment suppliers along the way), it's not a given that this will provide a major lift to total smartphone sales. Consumers will need to be convinced that 5G phones will deliver much better (rather than just incrementally better) user experiences than comparable 4G phones. And at a time when 4G networks often provide download speeds above 20 megabits per second, this might not happen on a large scale.
2. Foldable Phones and Dual-Screen Laptops Carve Out Niches
By smartphone industry standards, foldable phones still probably won't sell in massive volumes in 2020. High prices will remain a roadblock, as will the fact that addressing issues such as device weight/thickness and software compatibility are still works in progress. But it's easy to see the value proposition for foldables -- if the smartphone industry's history has shown anything, it's that consumers like having more screen space -- and following modest 2019 sales for Samsung's Galaxy Fold phone, demand for foldables is likely to pick up some as second-gen devices arrive.
Also look for dual-screen laptops based on Microsoft's ( MSFT) versatile Windows 10X platform ( announced in October and due to launch in the fall of 2020) to win over some early adopters. As with foldable phones, there are clear use cases for having more notebook screen space, even if it will take some time for developers to optimize their apps for 10X devices.3. GARP (Growth at a Reasonable Price) Tech Stocks Outperform
The Nasdaq has risen over 30% in 2019, and many well-known tech stocks -- from tech giants to chip companies to high-growth enterprise software and Internet names -- have posted much bigger gains. Odds are pretty good that we're not going to see a repeat performance in 2020, even if macro conditions remain favorable and current secular growth trends remain in place.
We're already seeing some signs of tech investors becoming more valuation-sensitive, as the recent selloffs witnessed by many software and Internet stocks drove home. Look for that trend to continue in 2020, as tech investors gravitate more toward names that didn't see enormous multiple expansion in 2019, but still have some long-term growth drivers in place.
4. Microsoft's Stock Goes Through a Digestion Period
Microsoft the company had a very good 2019, with the software giant registering double-digit sales growth and reporting strong top-line momentum for many key businesses. And Microsoft the stock had an even better year, rising over 50% and bringing Microsoft's market cap comfortably above $1 trillion.
Following two years of healthy multiple expansion, the going could get a little tougher for Microsoft the stock in 2020. Though businesses such as Azure, Dynamics and LinkedIn are still poised to see strong growth, Windows revenue growth, which benefited in 2019 from a business PC upgrade cycle ahead of Microsoft's ending of Windows 7 support in January 2020, is likely to slow this year. And the Office franchise might also see slower growth, now that a pretty large portion of Microsoft's corporate Office base has been migrated to Office 365.
Neither of these developments would be disastrous for Microsoft, which isn't as dependent on Windows and Office as it once was. But investors are setting the bar higher now.
At the same time, given that Microsoft possesses a stellar balance sheet and (ironically) isn't seeing the kind of antitrust scrutiny that many other tech giants are witnessing, it wouldn't be surprising to see Satya Nadella's firm pull the trigger on another big acquisition. There's no shortage of potential software targets if Microsoft wants to go in this direction.
5. AMD Sees Strong Cloud Momentum...and More Incremental Enterprise Progress
Advanced Micro Devices (AMD) made waves in August by rolling out second-gen Epyc server CPUs (codenamed Rome) that more than held their own against comparably-priced Intel (INTC) Xeon CPUs in terms of price/performance, performance per watt and compute density. Look for Internet/cloud giants -- a heavy-spending, technically savvy group of buyers that tend to care about the aforementioned features -- to be major buyers of Rome CPUs in 2020, both for internal workloads and cloud computing instances offered to businesses. Particularly since it increasingly looks as if Intel's anticipated Ice Lake Xeon CPUs won't be ramping until near the end of 2020 -- around the same time that AMD is expected to start ramping Rome's successor (codenamed Milan).
On the flip side, progress is likely to be slower for AMD among traditional enterprises where IT incumbents are often tough to dislodge and Intel -- aided by its brand, customer relationships and support among IT departments and corporate developers -- has been entrenched for a long time. That said, the technical strengths of AMD's desktop and server CPUs could help AMD gain a measure of enterprise share, as might Intel PC CPU shortages.
6. Nvidia Sees a Pair of Solid GPU Upgrade Cycles
Though it hasn't confirmed its plans yet, Nvidia (NVDA) is widely expected to unveil major refreshes for its server and PC GPU lineups in 2020. The rumor mill has pointed to the launch of GPUs that are based on a next-gen architecture known as Ampere and will be produced using one or more 7-nanometer (7nm) manufacturing processes.
Nvidia's most advanced PC and data center offerings currently rely on less advanced 12nm manufacturing processes. But that hasn't stopped the company from maintaining dominant positions in both the high-end gaming GPU market and the market for accelerators used by supercomputers and AI training systems. This sets the stage for Nvidia to strengthen its position in each market -- and drive solid upgrade activity among PC gamers and cloud giants -- as it rolls out more powerful and power-efficient 7nm offerings.
7. Cloud Gaming Sees Only Modest Adoption Among PC and Console Gamers
Cloud gaming is one of those concepts that sounds great in theory (Play a game on any device you want, with no need to install anything!) but can struggle to live up to the hype in practice. As initial reviews for Google's Stadia cloud gaming service drive home, issues such as input lag and so-so image quality can emerge, particularly if a user has a less-than-ideal Internet connection. And since cloud servers aren't free to build and operate, there's often a cost attached to the services on top of the price of a game purchase.
For these reasons, don't count on cloud gaming services to see massive 2020 uptake among PC and console gamers. Particularly with Microsoft offering compelling game-download subscription services, and both Microsoft and Sony (SNE) due to launch powerful new consoles.
At the same time, cloud gaming could make a bit of headway in 2020 on mobile devices, thanks to its ability to enable gaming experiences that smartphone and tablet processors can't deliver. Notably, Microsoft's upcoming xCloud gaming service will initially work on Android devices (just like its Xbox game-streaming software), and Facebook (FB) just bought Spanish cloud gaming firm PlayGiga.
8. ARM Server and PC CPUs Make Some Noise
While software compatibility can still be a major handicap for ARM-architecture server CPUs, they did see a bit of traction in 2019. Amazon Web Services (AWS) convinced some major enterprise clients to use its Graviton ARM CPU (unveiled a year ago), and followed this up in November by launching a much more powerful successor (the Graviton2) that it plans to use for both cloud computing instances and internal workloads. Also, Huawei unveiled an ARM server CPU that could be deployed by Chinese cloud giants, and Microsoft announced that it's using Marvell's (MRVL) ThunderX2 ARM CPUs within its cloud infrastructure.
All of this sets the stage for greater ARM server CPU usage in 2020, even if Intel and AMD's x86-architecture CPUs will still account for the lion's share of server CPU shipments.
Separately, there have been multiple reports stating that Apple plans to launch Macs featuring internally-developed ARM CPUs, and that the first ARM-powered Macs could arrive in 2020. And though Qualcomm (QCOM) has seen limited traction to date for its ARM CPUs for Windows notebooks, the company's recent decision to launch chips for cheaper notebooks could help it gain a little share.
As is the case for AMD's recent desktop and server CPU momentum, the elephant in the drawing room here is Intel's surrendering of its long-time manufacturing technology lead to Taiwan Semiconductor (TSM) . This is making it easier for ARM server and PC CPU developers to launch pretty competitive silicon with TSMC's help -- even if software support is still often a work in progress.
9. China Dials Up its Efforts to Buy Local
As trade tensions mounted, China took several steps to boost its purchases of locally-developed chips, hardware and software. Huawei, hit hard by U.S. export restrictions, began relying more heavily on products from its HiSilicon chip unit. Beijing also ordered government agencies and public institutions to stop using foreign PCs and software by 2022, and U.S. IT giants such as Cisco Systems (CSCO) reported seeing their Chinese sales come under pressure.
Additional efforts by China to up its usage of local tech (aided by both R&D investments and pressure from Beijing) seem pretty likely in 2020, even if there will be limits to how far these moves can go in some areas. Possibilities include pressing OEMs other than Huawei to step up their purchases of Chinese-developed chips, and pushing for the greater use of Chinese-developed servers and other IT hardware by local businesses.
10. Waymo and Google Fiber Undergo Strategy Changes
Two weeks ago, Google CEO Sundar Pichai replaced Larry Page as the CEO of Alphabet (GOOGL) . That put Pichai in charge of Alphabet's money-losing Other Bets segment, which includes the Waymo self-driving unit and the Google Fiber broadband unit.
Look for Pichai to shake things up at these businesses, given that Google Fiber has been in a holding pattern since halting its fiber rollout in 2017 and Waymo (in spite of having a technology lead) has seen limited progress to date in winning the support of major automakers.
Some possibilities: Greater flexibility by Waymo to address automaker concerns about surrendering too much control over the user experience; a faster rollout of Waymo's nascent driverless taxi service; large investments by Google Fiber in fixed-wireless broadband (this might require a name change); or simply shuttering Google Fiber and focusing Other Bets' attention elsewhere.
Predictions #11-20 can be found here.
(Apple, Microsoft, Nvidia, Facebook, Marvell, Alphabet and Cisco are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
