Five Forces Powering the Next Decade of Growth

As we navigate this period of transformation, we see five forces setting the pace for what comes next. They will shape how we live, work, and defend our homes, communities, and nations. They will define how societies and businesses run, how our economies function, and how we power it all.

1. The New Arsenal Defined by Software

Defense technology is entering a structural growth phase. Rising geopolitical risk, the experience of Ukraine and other recent conflicts, and the convergence of military and commercial innovation are all pushing budgets toward more modern capability. The United States and its allies are directing more spending to autonomous and remotely operated systems, space and airborne sensing, secure communications, and the software that connects these pieces. These systems shorten the time from identifying a threat to taking action. We believe they will sit at the center of allied defense planning for many years.

We see this as an attractive area for long-term shareholders. Many of the companies we follow play mission-critical roles yet still operate from relatively modest revenue bases. They often combine equipment with software and ongoing services. That mix can create more recurring and resilient revenue as systems in the field are upgraded rather than replaced. Several also sell into both government and commercial markets. This provides multiple paths to growth and can help soften the natural swings in any single budget.

Our research focuses on parts of the ecosystem where capability is scarce, and demand is rising. We spend time with management teams, former operators, and technical experts. We also build bottom-up views of the key products and programs in each business. A key part of our work is seeing systems operate in the field. In the Arizona desert, we watched small drones fly autonomously at about 25 mph, use artificial intelligence (AI) to lock onto a target, then accelerate to nearly 100 mph on impact. Experiences like this help us judge what is real and what is still hype.

In public markets, that work has led us to a leading U.S. drone and counter-drone company that we are actively evaluating as a potential investment. In private markets, we have invested through our Global Innovation strategy in Anduril Industries, a next-generation U.S. defense company that brings autonomy and AI into defense systems. We see that business as a clear example of the kind of modern supplier that can compound value as this defense technology cycle unfolds.

2. Automation Leaves the Lab

Similar to foundation models, advances in AI compute power and synthesizing data are pushing robotics forward. Reliability, easy integration, and fast time to value matter most. The near-term pull is in logistics and warehouse environments, where robots already handle narrow, repetitive tasks at scale. Amazon’s fulfillment network shows how mobile and stationary systems can share data, refine motion, and work safely with people. As hardware costs fall and software improves, we expect humanoid use cases to proliferate across more industrial applications first, before ultimately gaining adoption in consumer end-markets.

Our research focuses on how this landscape is evolving and which companies can turn prototypes into durable fleets. We want to understand where robotics is already earning its keep and where it is still stuck in pilots. We do that through fieldwork, conferences, and on-the-ground research across geographies, including in China, where industrial robot deployment and government support already run at far greater scale than in the United States. We are also deeply studying autonomous driving as an early lens into the potential for robotic advancements.

In the portfolios, our robotics exposure today is concentrated in Amazon and Keyence. Amazon gives us indirect access to one of the world’s most advanced logistics and robotics networks. Keyence is a key enabler of factory automation through its sensors, vision systems, and controls. Around these positions, we are doing deeper work in areas such as warehouse automation platforms, test and measurement equipment, collaborative robots, humanoid actuators, high-efficiency motor drivers, and machine vision. We want to own the businesses that make robots reliable, safe, and economically compelling, not just the ones that make the headlines.

3. Power Becomes the Constraint

The energy transition is blending with new power demand from data centers, transportation, industry, and households that are straining grids and forcing more aggressive investment in power infrastructure. The needs are broad-based, with generation, transmission, distribution, storage, behind-the-meter and demand-response solutions all requiring expansion and upgrades beyond what was warranted by renewables alone.

We are expecting a multiyear, or possibly multidecade, investment cycle across the entire power value chain, with the most attractive opportunities emerging in companies that can combine scale, speed, and technology to address the size, urgency, and complexity of the issues across the grid. If AI becomes anywhere near as impactful as we expect, the demand curve is going to shift upward across the developed world for the first time in decades. We expect that will require significant investment and create opportunities for well-placed businesses.

We have long held exposure to companies that benefit from the demand side of the energy transition. These include leaders across batteries, electric vehicles, and factory automation such as Contemporary Amperex Technology, BYD, Xiaomi, and Keyence.
However, with power demand increasing, we are now expanding foundation into areas that help with energy supply. These include companies such as Quanta Services, which provides engineering and construction services for transmission, distribution, and grid hardening initiatives, or WEG, which provides transformers, motors, and advanced grid equipment. We are also exploring opportunities in gas power generation, on-site power generation, and nuclear power that helps broaden and diversify sources of power supply. Importantly, we think the power demand drivers that we see emerging in the United States will eventually be replicated by the rest of the world, providing substantial duration to this trend.

4. Security Moves to the Core

Cyberattacks have become more frequent and costly. They have also become increasingly sophisticated. As more activity moves to the cloud and as AI tools spread, the attack surface for enterprises, governments, and individuals grows in scale and complexity. Security is no longer a discretionary budget item. It is a core operating requirement and a foundation for trust with customers, regulators, and partners.

Within our global strategies, we own several leaders that we believe are well-positioned for this long-term demand. Palo Alto Networks is evolving from a focus on network security to a broader, cloud-delivered platform that helps customers secure complex hybrid environments. Cloudflare is building a global edge network that improves application performance and also provides integrated security services against a wide range of online threats.

Alongside these public holdings, our private Global Venture strategy, with its focus on global resilience, owns earlier-stage cybersecurity businesses that address emerging risks in AI security (Dreadnode), software supply chain security (RevEng.AI), and mobile security (iVerify). These companies often confront new threat patterns several years before they become mainstream concerns.

By investing in both public and private cybersecurity businesses, we seek to stay close to the frontier of innovation while remaining disciplined on business quality, economics, and governance. Our aim is to participate in the growth of this essential layer of digital infrastructure in a way that supports durable, long-term value creation for our clients.

5. Orbit Turns Commercial

Space is becoming part of everyday life, not just a place for one-off missions. Satellites now help run the internet, support defense, guide planes and ships, track weather, and monitor changes in the climate. More rockets are flying, more satellites are going up, and more users are paying for these services. That is creating a growing set of businesses that can earn steady, long-term revenue.

Space has become more investible in large part because SpaceX has led efforts to lower the cost of launch. Over the last decade, the cost of getting a kilogram of payload to orbit has fallen to roughly $1,500, down about 95 percent from Space Shuttle levels. At the same time, satellites and other payloads have become more capable and less expensive to build and operate. Together, these shifts have made supply far cheaper and have expanded what customers can justify putting in orbit.

We can see the market responding. The number of satellites in orbit could rise from about 13,000 today to more than 30,000 by 2030. In 2025 alone, almost 4,000 satellites were launched globally, up from roughly 600 a year in 2019.¹ A next-generation, fully reusable heavy-lift vehicle now in testing could push costs lower over time, which would expand the set of viable missions again.

Launch is also starting to look like a profitable business. On a standalone basis, we believe the leading commercial workhorse rocket, SpaceX’s Falcon 9, appears able to earn gross margins above 50 percent.² Through our research, we have learned that Electron, the small launch vehicle of another listed provider, Rocket Lab, already generates EBITDA margins of about 15 percent on a standalone basis. The industry is also showing early signs of manufacturing scale. One major launch company can now produce roughly one main engine per day at about $250,000 each, down from more than $2 million per engine at the start. A separate manufacturer of telecommunications satellites has opened a new facility that can build two satellites per day, compared with one a week previously.³

For long-term investors, this looks less like science fiction and more like a new type of basic service, similar to mobile networks or cloud computing. Costs are falling, tools are easier to use, and demand from governments and companies is rising. The main limits today are how much capacity providers can build, how reliably their systems operate, and how well they connect with other networks. Businesses that improve scale, reliability, and integration may be able to grow for many years.

To study this trend, the team goes as close to the work as possible. Research includes visits to rocket and satellite factories, meetings with leadership teams, and careful review of prices, contracts, and waiting lists. The team also spends regular time with users in defense, climate, shipping, and telecom to understand how space services fit into daily work and budgets. This helps separate durable demand from hype.

Today, the strongest opportunities appear in several areas. These include builders of rockets, makers of satellites, and providers that run satellite networks and sell data and connectivity on a subscription basis. The team is also tracking specialists that help design and operate missions, as well as early efforts to extend satellite life and keep space clean.