Asia's smart cities are almost here. In fact, many cities throughout Asia have already begun the transition. In China, 200 cities are already considered "smart." In Yinchuan, commuters can pay for a bus ride simply by smiling at the bus driver. Facial recognition technology does the rest.
At this point, the only thing truly holding smart cities back are our mobile networks. The technologies in smart cities will consume and exchange a lot of data. That means faster cellular networks are required for smart cities. Now, with 5G being rolled out in many Chinese cities in 2020, it's finally time for smart cities to thrive.
And this is good news for investors. The smart city market is expected to boom in the coming years, growing at a compound annual growth rate (CAGR) of 18%. It's expected to be worth over US$717 million by 2023.
Given the potential, here are two companies that I think investors should look at to capitalize on the upcoming smart city revolution.
1. Tencent Holdings Ltd (700 0.54%)
Chinese internet giant Tencent is more than prepared for smart cities. The company has been preparing for them over the last couple of years, transforming its social media application WeChat into a smart cities tool.
Today, Wechat can be used to make frictionless payments, rent scooters, and pay for a wide range of services. This sets Tencent up to benefit from smarter payment systems.
The company is also targeting the transportation sector of smart cities. In 2018, Tencent announced a partnership with the government of China's Jiangsu province. According to this partnership, Tencent will implement 30 smart city projects in nine sectors, including transportation.
Transportation will be a critical element of China's smart cities, especially with more and more of the rural population opting to move to cities where the best economic opportunities exist. Some of Tencent's achievements in the area include scan-to-rent bikes and frictionless payment systems.
Jiangsu ranks second only to the Guangdong province in size, and provides Tencent with a valuable launching point for smart cities.
The company also announced that it would be part of PATH, a collaboration dedicated to building China's smart cities. Other members of the partnership include Ping An Insurance Group, Alibaba Group, and Huawei.
2. NVIDIA Corporation (NVDA -1.51%)
Another critical element of smart cities is going to be data and data storage. In fact, just one smart car will need 4,000GB of data just to operate. Considering this, it's no surprise that companies specializing in data storage are going to be key winners in the smart city revolution.
NVIDIA is one such company. The American-based global technology company. NVIDIA has positioned itself as a global leader in smart cities by seeking out partnerships with Chinese companies, allowing it to enter the Chinese market.
These partnerships include a partnership with two of China's tech titans, Alibaba and Huawei who will use NVIDIA's "metropolis" platform, an edge-to-cloud platform built specifically for smart cities.
The platform allows businesses to use cutting-edge technology and an established developer ecosystem to deploy Internet of Things (IoT) solutions. Metropolis could be applied in dozens of settings from retail to traffic management and factory inspection. This tool is also fairly unique in the current smart cities market setting NVIDIA up for success both domestically and internationally.
While there are dozens of companies helping to develop the smart cities of the future, there are at this point some clear market leaders.
Tencent and NVIDIA are two such companies. Both companies have established critical partnerships that will help them thrive in a heavily interconnected market. NVIDIA offers investors the opportunity to invest in Asia's smart cities and the broader global market while Tencent is dominant in China and will likely remain so thanks to the proliferation of its WeChat platform.
Now is the time for investors to be looking at smart cities seriously. With 5G just around the corner, smart cities are getting ready to launch and could be the next big investment trend for long-term investors.
A version of this article originally appeared on our Fool Asia site. For more coverage like this head over to Fool.hk.en.