GOLDMAN: The 8 Extraordinary Technologies Forcing Businesses To Adapt Or Die

With stock prices near all-time highs, investors have grown increasingly uncomfortable about where the markets may head in the near-term.

Perhaps the better idea is to think long-term.

In a new report titled, "The Search for Creative Destruction," the analysts at Goldman Sachs do just that.

"We showcase eight secular disruptive themes that we believe possess the potential to command greater attention in the coming years," wrote lead analyst Robert Boroujerdi. "Indeed, these stories through product or business innovation are poised to transform addressable markets or open up entirely new ones, offering growth insulated from the broader macro environment and creating value for their stakeholders, in our view."

Goldman's themes cut across all industries from manufacturing to finance to tobacco.

We've put together the highlights for each destroyer, describing what it does and quantifying its growth potential.

Thanks to Goldman Sachs for giving us permssion to feature their charts.

Creative Destroyer 1: E-Cigarettes

Robert Johnson

Goldman's Judy Hong describes e-cigarettes as basically all the good stuff about regular cigarettes but none of the bad. "Imagine a product that is possibly >99% less harmful than cigarettes, delivers a similar use experience and offers a better economic bargain—this is the proposition of electronic cigarettes (e-ci gs)."

Source: Goldman Sachs

E-cigarettes could grab a tenth of the entire tobacco market.

REUTERS/Christian Harmann

E-ci gs yield higher margins for manufacturers and retailers as they aren't subject to excise taxes or settlement payments —  (30-40%) vs. traditional cigarettes. Goldman estimates they could hit $10bn in sales over the next several years, compared with more than $1bn this year, while grabbing 10% of overall tobacco market (and 15% of market profits).

Source: Goldman Sachs

Here's Hong's growth outlook for e-ci gs.

Goldman Sachs

Creative destroyer 2: Cancer Immunotherapy

Dr. Dylan Burnette

Immunotherapy "trains" one's immune system to attack cancer cells, giving it an advantage over traditional cancer therapies like chemo (which can kill healthy cells) and "targeted" therapy (against which cancer cells often learn resistance).

Source: Goldman Sachs

The biggest opportunity is in "combination therapy."

Mayo Clinic/YouTube

"While single agent immunotherapy remains compelling, initial results of combination therapy (nivolumab/PD-1 + Yervoy) in melanoma is even more striking with a synergistic effect," Goldman's Jami Rubin and Keyur Parekh write. Tumor response rates are usually in the mid-20% range but can get up to 50%. The pair put market potential at $10-15 billion in revenues by 2025, with lung cancer as the primary area.

Source: Goldman Sachs

Here's Goldman's timetable for when immunotherapies will hit the market.

Goldman Sachs

Creative Destroyer 3: LEDs

REUTERS

Industrial-scale light emitting diodes (LEDs) enjoy three main advantages over regular light sources: energy savings of up to 85% longer lifetime, and are more easily programmed.

Source: Goldman Sachs

In the commercial sector, LED lighting could be practically everywhere by 2020.

REUTERS/Toby Melville

Goldman's Brian Lee says LED sales will reach $11 billion by 2015, and will see a compound annual growth rate of about 40% over the next five years in the industrial and commercial market. LED technology can take on about 45% of the overall lighting market for that period and has the potential to reach over 60% penetration by 2020. 

Source: Goldman Sachs

Creative Destroyer 4: Alternative Capital In The Reinsurance Market

Levo League

Reinsurers — firms that insure the insurers—  are in trouble, Goldman's Brian Nannizzi says. Mainstream reinsurance firms evaluate risk based on things like capital intensiveness or a company's risk-adjusted return profile. But totally unrelated firms like Berkshire Hathaway have now entered the market.

"We believe third-party investors evaluate [property-catastrophe] returns in the context of their overall portfolio and are willing to accept lower returns than the traditional reinsurers, as these instruments provide non-correlated returns that enhance their overall portfolio’s return profile," Nannizzi writes.

Source: Goldman Sachs

Pension funds could take up to a third of the market.

NOAA | NASA

The current market is about $300 billion. Nannizzi estimates that pension funds could drop up to $100 billion into the market through the end of the decade.

Source: Goldman Sachs

Creative Destroyer 5: Natural Gas Engines

DNR Lousiana

Compressed and liquefied natural gas is increasingly be used in industrial and commercial fleets, Goldman's Jerry Ravich and Ravi Gill write. Though thus far penetration remains relatively confined — about 3% of all vehicles. 

Source: Goldman Sachs

Trucks will be the future.

REUTERS/Fred Prouser

Goldman says natgas engines will comprise 10-15% of total truck sales, for a penetration rate of 20-30% of hauling fleets, by 2020.

Source: Goldman Sachs

Here's Goldman's outlook for market penetration.

Goldman Sachs

Creative Destroyer 6: Software-Defined Networking

REUTERS/Kim Kyung-Hoon

A smarter way for electronic components to send and receive data, one that catches up with all the advances from cloud computing. "More of the intelligence moves to the software layer, equipment becomes programmable, and network services get virtualized, leading to an ecosystem of networking platforms and applications that is likely to replace the legacy world of insular, vertically integrated, and manually configurable equipment," Goldman's Simona K. Jankowski and Kent Schofield write.

Source: Goldman Sachs

The growth outlook, however, is cloudy.

Daniel Goodman / Business Insider

The size of the current market where SDN could make an impact is $51 billion. That should soon change. "Offsetting the likely declines and commoditization of the hardware, we expect to see the emergence of a new networking software segment, though it is too early to size it given we’re still in the stage of nascent start-up activity," Jankowski and Schofield write.

Source: Goldman Sachs

Goldman says cloud data growth will in turn drive SDN growth.

Goldman Sachs

Creative Destroyer 7: 3D Printing

REUTERS/Fabrizio Bensch

Cheaper and more customizable than regular manufacturing  methods. Products are formed layer-by-layer, a process that carries less overhead and allows for more complex designs, Goldman's Cristina Colón writes. 

Source: Goldman Sachs

Growing value within an even faster-growing value chain.

Microsoft

Currently a $2.2 billion market, forecasts call for a compound annual growth rate of 23%, with revenues reaching $10.8 billion by 2021. But there's something else to consider, says Colón: "The 3D printing industry operates within the design-to-manufacture value chain, which by some estimates is a $30 billion opportunity."

Source: Goldman Sachs

Here's how 3-D printing applications breaks down.

Goldman Sachs

Creative Destroyer 8: Big Data

Facebook

Social media, blogs, web browsing, and firms' security measures are generation enormous quantities of data, and it needs to be stored somewhere, Goldman's Greg Dunham writes.

Source: Goldman Sachs

Different segments will see different growth rates.

The overall market currently stands at $11 billion, with a projected 32% compound annual growth rate over the next five years. Dunham breaks down the segmentation:

• $3.1 billion infrastructure market (servers, storage and networking) at a 43% five-year CAGR
• $2 billion in software at a five-year CAGR of 32%
• $3.1 bn in services, also at a five-year CAGR of 32%

Source: Goldman Sachs

Now compare with Citi's list...

Mladen Antonov/AFP

The 10 disruptive technologies that will challenge the way you do business »

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