Counting to a Trillion: How Sensors Are Changing the Face of Investment Opportunity

by Benjamin Ruegsegger, AllianceBernstein

How well did you sleep last night? Well, for about $130, you can buy a sensor-bearing wristband that will tell you how long you slept and how you slept, and even figure out the optimal time to wake you—with a gentle vibration. This is just one way sensor technology is improving our lives and creating investment opportunities. But how—and where—will this transformation take shape?

A Thousand Billion Sensors

According to Intel, Hewlett-Packard and other tech companies, trillions of connected sensors will be deployed worldwide toward the end of this decade. This sensor wave is ushering in a new age of awareness for consumers and businesses, providing unimaginable connectivity, context and visibility.

But where will the opportunities be? Sure, investors can aim for the easy targets—sensor firms that create the technology. But it takes vision and an understanding of how businesses can use sensors to understand how they can reshape entire industries—and which companies will benefit the most.

Let’s start with a look at healthcare.

The Remote Physician

The healthcare system is grappling with two big problems: an aging population and runaway spending. Sensors—and the Internet—can help keep our loved ones healthier by stepping in for hospitals and doctors. A simple bracelet and some connectivity can allow remote monitoring of blood pressure or oxygen levels. Platforms such as QUALCOMM’s 2net are helping make this system secure and compatible.

One way sensors can help control healthcare costs is by making sure patients take their medicine. Proteus Health makes an ingestible sensor that can be embedded in the pill itself—it’s smaller than the tip of a number-two pencil! Running on stomach enzymes, the sensor sends information about when a patient takes a pill and even notes the body’s reaction to the medicine. Pretty soon, sensors will be monitoring our implants, telling us whether we’re likely to have a heart attack in the next few weeks—or even detecting cancer by checking someone’s breath.

Autonomous Automobiles

If one area exemplifies the spreading reach of sensors, it’s the auto industry. Today’s cars are loaded with sensors, making them highly complex electronic machines that in many ways think for themselves—and generate profits for manufacturers (Display). Adaptive cruise control, blind-spot warnings, automated parking—even sensors that watch your face and vibrate the steering wheel if you start to drift off. Much better than rumble strips.

And these are only the initial steps. Eventually, sensors will enable cars to drive themselves—a technological revolution pioneered by Google, which has logged over 500,000 miles refining it. We’re still several years from broad adoption, but sensors will be at the heart of the autonomous auto.

The Connected Farm

Sensors also hold great promise for our environment, measuring soil quality, moisture levels and toxins in the water supply. Today, farm combines can have as many as 100 sensors that measure everything from the machine’s engine performance to the quality of the grain it harvests. Heavyweights such as Monsanto, Deere & Co., and Trimble Navigation are working to turn that data into intelligence that may improve crop yields. Monsanto’s $1 billion acquisition of The Climate Corporation is a big bet in this direction; close to 200 scientists are working daily to make sense of 50 terabytes of weather data. Not megabytes, not gigabytes, but terabytes. The battle for the intelligent farm is well under way.

These are just a few examples of the expanding role sensors are already playing in the world around us. To get from a few billion sensors to a trillion connected sensors, there are hurdles to overcome: better power and energy management, standardized manufacturing, and improved Internet storage and computing capacity to house and interpret oceans of data.

Given the incredible progress in sensor technology so far, we think it’s foolish to bet against further—and faster—advances. Investors should embrace the impact sensor technology is having on their lives—and be on the lookout for the countless investment opportunities it’s creating.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AllianceBernstein portfolio-management teams.

Benjamin Ruegsegger is Portfolio Manager—Growth Equities at AllianceBernstein