These stocks are the best way to play the technology transformation mega trend, Jefferies says

Published Sat, Dec 19 20208:32 AM EST

(This story is for CNBC Pro subscribers only.) The unprecedented pandemic supercharged one of the global mega trends — technological transformation — with a rapid shift toward online entertainment and cloud solutions as well as fintech, according to Jefferies. The bank identified a handful of stocks at the forefront of this accelerating change. So-called mega trends are defined as long-term transformative forces that have the capacity to change the global social, economic and political landscape over the decades to come. Apart from technological transformation, four other mega trends are climate change, geopolitical tensions, demographic shifts and urbanization, according to Jefferies. This year, thanks to the Covid-19 crisis, the best performing themes were all associated with the mega trend of technological transformation, Jefferies said. These themes include: Financial Technology Artificial Intelligence Education Technology Future of Mobility Cloud Online Entertainment Jefferies highlighted six companies with high revenue exposure to at least three of these growing trends. These companies are: Alphabet , Microsoft , Tencent, Nvidia, Amazon and Alibaba . "2020 saw unprecedented technological adoption and the best performing themes were all associated with tech," Simon Powell, Jefferies' equity strategist, said in a note. Jefferies predicted that over the next decade, there will be a tenfold increase in the amount of data that the world produces, which will be a strong tailwind of demand for cloud services companies. Nvidia is a leading provider of chips used in date centers, while Amazon, Microsoft and Alphabet are the three biggest players in Infrastructure as a service (IaaS), a form of cloud computing that provides virtualized computing resources over the internet, Jefferies said. Meanwhile, Nvidia also generates more than 20% of its sales from online entertainment. The chipmaker posted strong sales of its graphics processing unit chips in the third quarter, which are increasingly important for both games and artificial intelligence developers. Shares of Nvidia have more than doubled this year. "Demand for entertainment is growing," Powell said. "This spans many forms of content from TV and film streaming into the home as well as video gaming and online gambling." On the fintech front, a duo of Chinese conglomerates have taken up one of the largest markets in the world. Alibaba is the parent company of Ant Financial, the world's highest-valued fintech company. It is also the owner of the world's largest mobile payment platform Alipay, which controls about 55% the Chinese mobile payment market, Jefferies noted. Meanwhile, Tencent is also a key player in the space as its WeChat Pay has about 40% share of the Chinese mobile payment market, Jefferies said.

An AI robot by CloudMinds is on display on the opening day of the China International Robot Show 2018 at the National Exhibition and Convention Centre on July 4, 2018 in Shanghai, China.

China News Service

(This story is for CNBC Pro subscribers only.)

The unprecedented pandemic supercharged one of the global mega trends — technological transformation — with a rapid shift toward online entertainment and cloud solutions as well as fintech, according to Jefferies. The bank identified a handful of stocks at the forefront of this accelerating change.

So-called mega trends are defined as long-term transformative forces that have the capacity to change the global social, economic and political landscape over the decades to come. Apart from technological transformation, four other mega trends are climate change, geopolitical tensions, demographic shifts and urbanization, according to Jefferies.