Using these criteria of high growth and dynamism, we identified 18 industries with potential to become arenas of competition in the next two decades. They are electric vehicles, digital ads, semiconductors, shared autonomous vehicles, space, cybersecurity, e-commerce, artificial intelligence (AI), cloud, batteries, modular construction, streaming video, video games, robotics, non-medical biotech, future air mobility, obesity drugs, and nuclear fission. If the past is any guide, they will be crucibles of competition, innovation, and value creation, accounting for much of the future change in the business landscape and the world. Together, these industries could yield $29 trillion to $48 trillion in revenues and $2 trillion to $6 trillion in profits by 2040.
Arenas of competition are where the action in the economy is most intense, generating more than twice the revenue growth and triple the market cap growth of other large industries, and enable the emergence of very large and growing global corporations. While the 12 arenas of today created sweeping change between 2005 and 2020, the arenas of tomorrow could bring about even greater changes, shaping how we use data, approach healthcare, transport people and goods, and communicate.
The “arena-creation potion” that produces this growth and dynamism has three telltale ingredients. The first is a technology or business model step-change that fundamentally transforms how products and services are developed or delivered. The second is a pattern of competitive escalation of investments that leads to larger margins and rapidly expanding market share. This results in an arms race in which companies invest to scale and scale to invest—witness the 12-fold expansion in capital expenditures and R&D spending by the six biggest technology companies since 2010, to a total of $410 billion in 2023. The third ingredient is a large or growing market.
But predicting the development of arenas is not an exact science, and we recognize the possibility—indeed, the likelihood—that we may be getting some things wrong. Looking back to 2005, no one could have predicted all of the ways in which the arenas of today developed.
Three critical swing factors could be fundamental to the evolution of the arenas of tomorrow. The first variable is geopolitical shifts, such as regulation of innovation, turbulence in trade and markets, increased regulation, and other barriers that cause companies to adopt a greater regional focus. The second variable is AI, which could fundamentally change the shape of several arenas over the coming decades.
The third variable is the pace of the green transition, which could affect revenues, depending on whether governments, consumers, and businesses make cutting carbon emissions a priority.
Recognizing the early signs that an arena may be forming will impact companies and investors in different ways. Potential customers of arenas will be required to accelerate their adoption of new capabilities; suppliers should identify the new upsides and risks of the changing environment; businesses that are likely to be disrupted need to determine how they can proactively pivot and capture growth opportunities; and investors will have to determine the right time to ride the new wave.
This article originally appeared in Fortune.