Markets
Investing Megatrend: How Rapid Urbanization is Shaping the Future

How Rapid Urbanisation is Shaping the Future
The world is constantly changing, and many of these shifts have the potential to alter the investment landscape.
While some of these changes can be temporary and fleeting, others can be powerful, transformative “megatrends” that shape how society is organized at a fundamental level.
One such megatrend that has been in place for decades is the rapid rate of population growth in urban areas — and while it’s been highly influential thus far, we’ve likely only seen the beginning of its formative impact on the global economy.
An Intro to Rapid Urbanisation
Today’s infographic comes to us from iShares by BlackRock, and it highlights the case for rapid urbanisation as being one of the most important overarching trends to watch in markets over the long term.
It’s a trend that originated in developed economies in the 21st century, as people transitioned from agricultural work to factory and service jobs.
Region | Urban share of population (1900) | Urban share of population (2016) |
---|---|---|
United States | 40% | 82% |
Japan | 12% | 91% |
Western Europe | 41% | 80% |
In these developed economies today, cities are major sources of innovation and wealth creation, and the World Bank estimates that over 80% of global GDP is now generated in cities.
A Global Shift
Over the coming decades, the large-scale role of cities will become even more amplified as rapid urbanisation spills over to the rest of the world.
Billions of people — especially in Asia and Africa — will be seeking opportunities in cities over the coming decades. Between 2018 and 2050, the global urban population will increase from 55% to 68%, adding another 2.5 billion people to cities around the world.
Rank | Country | Urban population growth (2018-2050) |
---|---|---|
#1 | India | 416 million people |
#2 | China | 255 million people |
#3 | Nigeria | 189 million people |
Nearly 90% of this growth will be in Africa and Asia, with India alone adding 416 million new people to its cities — more than any other country in the world over this timeframe.
The Dawn of the Megacity
People are not only flocking to cities, they are flocking to megacities — urban conglomerations with more than 10 million people.
In just 40 years, the total amount of megacities will quadruple, gaining nearly 600 million residents in the process:
Year | # of Megacities | Population | % of Urban Population |
---|---|---|---|
1990 | 10 | 153 million | 7% |
2010 | 23 | 370 million | 12% |
2030 | 41 | 730 million | 14% |
With billions of new people living in urban areas – and many of them living in megacities — we will have to rethink how our cities are designed and engineered.
And as this happens, the city as we know it will be revolutionised.
The Urban Opportunity
Rapid urbanisation will create both opportunities and challenges for society, and a plethora of investment possibilities in the process.
As global cities become more integrated with technology, new business models will emerge as cities become smarter, denser, and more connected.
These potential opportunities include:
- Smarter cities
Cities will embrace technology to improve services and infrastructure, adding tech-driven features like smart lighting or real-time traffic updates. - New infrastructure
Cities and companies will invest heavily to build next generation infrastructure, such as data centers, green energy, and citywide WiFi. - A focus on personal security
With higher crime rates in cities than rural areas, governments will employ elevated levels of surveillance on citizens in cities. Increasing connectivity means that every activity is logged and monitored. - New services
As cities become more connected, non-traditional players — such as cybersecurity experts or cleantech engineers — will be needed as a part of city planning processes. - No car ownership
A lack of space and the rise of autonomous cars will mean fewer people will own a car, preferring to use ‘summon-able’ services instead. - New healthcare systems
As population density grows to unprecedented levels, existing healthcare systems will need to be radically overhauled to deal with this influx.
Rapid urbanisation will have a wide-ranging impact on global economics, demographics, and society as a whole.
As rapid urbanisation and other megatrends collide and feed off each other, there’s no doubt that even more thematic investment opportunities will be created.
Markets
3 Reasons Why AI Enthusiasm Differs from the Dot-Com Bubble
Valuations are much lower than they were during the dot-com bubble, but what else sets the current AI enthusiasm apart?

3 Reasons Why AI Enthusiasm Differs from the Dot-Com Bubble
Artificial intelligence, like the internet during the dot-com bubble, is getting a lot of attention these days. In the second quarter of 2023, 177 S&P 500 companies mentioned “AI” during their earnings call, nearly triple the five-year average.
Not only that, companies that mentioned “AI” saw their stock price rise 13.3% from December 2022 to September 2023, compared to 1.5% for those that didn’t.
In this graphic from New York Life Investments, we look at current market conditions to find out if AI could be the next dot-com bubble.
Comparing the Dot-Com Bubble to Today
In the late 1990s, frenzied optimism for internet-related stocks led to a rapid rise in valuations and an eventual market crash in the early 2000s. By the time the market hit rock bottom, the tech-heavy Nasdaq 100 Index had dropped 82% from its peak.
The growing enthusiasm for AI has some concerned that it could be the next dot-com bubble. But here are three reasons that the current environment is different.
1. Valuations Are Lower
Stock valuations are much lower than they were at the peak of the dot-com bubble. For example, the forward price-to-earnings ratio of the Nasdaq 100 is significantly lower than it was in 2000.
Date | Forward P/E Ratio |
---|---|
March 2000 | 60.1x |
November 2023 | 26.4x |
Lower valuations are an indication that investors are putting more emphasis on earnings and stocks are less at risk of being overvalued.
2. Investors Are More Hesitant
During the dot-com bubble, flows to equity funds increased by 76% from 1999 to 2000.
Year | Combined ETF and Mutual Fund Flows to Equity Funds |
---|---|
1997 | $231B |
1998 | $163B |
1999 | $200B |
2000 | $352B |
2001 | $63B |
2002 | $14B |
Source: Investment Company Institute
In contrast, equity fund flows have been negative in 2022 and 2023.
Year | Combined ETF and Mutual Fund Flows to Equity Funds |
---|---|
2021 | $295B |
2022 | -$54B |
2023* | -$137B |
Source: Investment Company Institute
*2023 data is from January to September.
Based on fund flows, investors appear hesitant of stocks, rather than overly exuberant.
3. Companies Are More Established
Leading up to the internet bubble, the number of technology IPOs increased substantially.
Year | Number of Technology IPOs | Median Age |
---|---|---|
1997 | 174 | 8 |
1998 | 113 | 7 |
1999 | 370 | 4 |
2000 | 261 | 5 |
2001 | 24 | 9 |
2002 | 20 | 9 |
Many of these companies were relatively new and, at the peak of the bubble in 2000, only 14% of them were profitable.
In recent years, there have been far fewer tech IPOs as companies wait for more positive market conditions. And those that have gone public, the median age is much higher.
Year | Number of Technology IPOs | Median Age |
---|---|---|
2020 | 48 | 12 |
2021 | 126 | 12 |
2022 | 6 | 15 |
Ultimately, many of the companies benefitting from AI are established companies that are already publicly traded. New, unproven companies are much less common in public markets.
Navigating Modern Tech Amid Dot-Com Bubble Worries
Valuations, equity flows, and the shortage of tech IPOs all suggest that AI isn’t shaping up to be the next dot-com bubble.
However, risk is still present in the market. For instance, only 33% of tech companies that went public in 2022 were profitable. Investors can help manage their risk by keeping a diversified portfolio rather than choosing individual stocks.

Explore more insights from New York Life Investments.

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