UniSuper’s top holdings include some of the largest technology companies in the world and CIO John Pearce believes we are only just at the beginning of the technological revolution.
January 2023 was a scary month for technology bulls.
That month saw an unprecedented number of jobs cut in the sector, with the overall number edging towards 100,000 lay-offs in a single month.
Some of the largest technology companies in the world already started to curtail their staff numbers towards the end of last year, citing the economic environment and the need to improve their operational costs.
Companies such as Google, Amazon and Microsoft laid off thousands.
According to tracker site www.layoffs.fyi, Amazon has cut its workforce by 27,000 people since mid-November last year, while Google announced in January 2023 it would cut 12,000 jobs. That same month, Microsoft cut 10,000 jobs.
Even video-conferencing provider Zoom announced in February 2023 it would cut 1300 of its staff, which seems like a much smaller number compared to the largest technology companies, but it accounted for no less than 15 per cent of its total workforce.
Yet to call this a day of reckoning for the sector after years of stellar growth would be akin to ignoring the bigger trend, John Pearce, Chief Investment Officer at UniSuper, says.
If you think about artificial intelligence, cloud computing and going from 5G to 6G … anyone that wants to call it the death of tech, they're not paying attention to history
We are in the age of technology and the long-term trend is towards the adoption of more technology, not less, Pearce says.
“One of the reasons that we are still so bullish [on technology] over the medium to long term is that we are still in the early innings of this megatrend,” he says in an interview with [i3] Insights.
“If you think about artificial intelligence, cloud computing and going from 5G to 6G … anyone that wants to call it the death of tech, they’re not paying attention to history.”
UniSuper has large holdings in the technology sector. Among its top 20 international share holdings by value, we find Microsoft and Apple at the top, while Google’s parent company, Alphabet, and Amazon also make the list.
Pearce has no plans to cut back on these names in any significant way just yet.
“How long did the agricultural era last? Then you had the industrial era and this is the technology era. We’re still in the early stages,” he says.
ChatGPT vs Google
Although the trend towards more technology is likely to continue, the question can be asked whether current behemoths such as Google and Amazon will retain their dominant positions in the years to come.
Technology can be easily disrupted as the classic case of Kodak and the demise of film-based photo cameras has illustrated.
The release of ChatGPT to the world on 30 November last year caused many to question whether this would end the dominance of Google as a search engine.
But again Pearce is somewhat skeptical about such grand predictions.
“When you’ve got over 90 per cent of search and every per cent is worth billions, then it’s almost like you can only go one way,” he says.
Is [ChatGPT] a threat? Absolutely. When you are pretty much a monopoly provider, everything is a threat. But you know the pie is growing. Google is still going to have the lion's share of a massive and growing pie
“Is [ChatGPT] a threat? Absolutely. When you are pretty much a monopoly provider, everything is a threat.
“But you know the pie is growing. Google is still going to have the lion’s share of a massive and growing pie.”
Besides, companies like Google are hardly going to sit by the sidelines and watch others eat their lunches, he says. They will put up a fight and develop disruptive technologies of their own.
In fact, Pearce seems somewhat underwhelmed by the capabilities of technologies such as ChatGPT. Although he doesn’t deny the great advancements made in natural language processing and artificial intelligence, the practical application of these technologies still seems rudimentary to him.
“[This technology] still has such a long way to go. When you look at something like predictive text on your phone and how much it still produces rubbish, you would think they should be able to predict some of the simplest things,” he says.
“But how many times do you have to go back and override it? We’ve got a long way to go before they start doing complex stuff.”
He doesn’t think ChatGPT is likely to replace anyone yet, especially those that require a certain level of acquired skill.
“In terms of ChatGPT, or any of this sort of generative AI, I don’t think you’ve got anything to worry about,” he says.
“If you’ve got the skills of a high school kid, then you’re in trouble. But if you’ve got skills that you’ve honed over a career, then I don’t see that you’re in any danger anytime soon.”
[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.