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Holon Global Investments - Active Fund Manager

Holon Photon Fund

Holon Global Investments - Active Fund Manager

Insights

It’s time to look at data production vs. storage capability

Published 10 Jun 2022

You’re likely to have heard the rumblings: there will be exponentially more data created, in the very near future. But, how much? How much is too much, i.e. can we store it all? Do we need to? And how does this affect investors?

The state of data production

The Holon Tesla Report1 released in October 2021, undertook substantial analysis to estimate the volume of data that autonomous electric vehicles (EVs) will create over the next three decades as car owners replace ICE (internal combustion engines) vehicles. Holon estimates the global EV fleet will accelerate from 12 million vehicles in 20212 to 569 million in 2035 and eventually 970 million in 2040. With adoption of Level 4/5 autonomy (Figure 1, below) likely to become standard across EV manufacturers by 2030, we estimate that passenger EVs will generate 11,900 Zettabyte (ZB) and 26,200 ZB of data respectively in 2035 and 2040.

Figure 1: Automation levels of autonomous cars

 Source: SAE International

We also need to consider data production from autonomous EV taxi and ride-hailing fleets (e.g., Uber), which Holon believes will reach a combined total of 78 million and 90 million vehicles respectively in 2035 and 2040. With an average weekly usage of 30-40 hours per week verses just 5 for passenger vehicles, we believe both vehicle types will generate 8,000 ZB of data in 2035 and 11,900 ZB’s in 2040. This raises Holon’s autonomous EV data generation estimates for both passenger and hire vehicles to 19,900 ZB in 2035 and 38,100 ZB in 2040.

We have also estimated data production from IoT (Internet of things) devices/sensors, which are expected to be the second largest data generation source over the next decade. Softbank owned ARM Holdings, a UK based semiconductor chip designer, estimates IoT devices will surpass 1 trillion in 20353.

Using our more conservative estimate of 208 billion devices in 2035 and a device data production estimate of 50 KiB (kilobytes) every 30 seconds, Holon believes that IoT devices will produce 10,900 ZB of data. By 2040, our IoT device estimate of 622 billion units increases our data production estimate to 32,700 ZB.

The sum total of our EV and IoT data estimates is shown in Figure 2, below. This estimate excludes data production from 19 other technology platforms4 emerging this decade, including virtual & augmented reality, 5G, blockchain, robotics, machine learning and artificial intelligence. We believe those technologies could add an additional 50% or more data on top of these estimates, further illustrating Holon’s firm view that the current IDC estimates are massively underestimating global data production by a factor of 15-25x on their 2035 estimate of 2,140 ZB.

Figure 2: Holon estimate of total data created by autonomous EVs and IoT (ZB)

 

Source: Holon

The state of data storage capacity

Where we store our data is undergoing a fundamental change over the next decade as well. In 2021, approximately 5 ZB or 65% of global data storage was found in billions of end-user devices5 like laptops and mobile phones, while just 3 ZB (35%) is found in dedicated data centres. As the source of data production shifts over the next 5 years from humans to machines, data storage will shift significantly towards data centres.

Filecoin, a decentralised data storage project developed by Protocol Labs, has a 2040 data storage target of 1,000 ZB6, an increase of 330x over 2021’s global data centre capacity. For this to be achieved, annual data storage capacity must grow at a compound rate of 36.2% over the next 19 years, as seen in Figure 3 below.

Figure 3: Getting to 1.000 ZB data storage capacity by 2040

Source: Holon

Using these Filecoin network estimates, we can further estimate storage capability, i.e. the percentage of annual data production that can be stored by new capacity additions each year. Using Holon’s data estimates, global capability is set to dramatically fall from 0.6% in 2020 to just 0.1% in 2025, as seen in Figure 4 below. This occurs principally due to data production growth from EVs and IoT devices being much higher than storage capacity growth. Storage capability improves over the period from 2030 to 2040, reaching 0.2% in 2035 and 0.4% in 2040.

Figure 4: Annual data storage capability, 2020 – 2040

Source: Holon

This raises a critical question, how much data do we actually need to store?

The arrival of 19 additional new technology platforms7 over the next 2 decades, will all require substantial data storage capacity to manage massive datasets that are required to ‘train’ and develop their initial processes and/or skills. Think of an autonomous car that is simply required to drive in a circle in an empty car park, constantly checking its progress against stored datasets to improve outcomes.

Once this initial step is refined, increasingly more complex datasets are required to further refine processes towards a complete working model. In the EV example, this would be analogous to improvements in driving capabilities towards unassisted driving in urban environments.

Very little research is publicly available that adequately addresses the key question on whether sufficient global data storage capacity will be available to meet Holon’s demand expectations over the next few decades. Without this storage capability, a continuation of improvements in productivity and quality of life achieved through advancements in technology could be substantially inhibited.

What does it mean for investors?

Investors should consider building exposure to companies providing infrastructure to build the global data storage network. While building global capacity towards 1,000 ZB by 2040 looks unachievable at first glance (330x larger than 2021’s capacity), anything less risks causing a dramatic slowdown in technological innovation advancements over the next two decades. Without data storage, innovation simply cannot continue.

Few sectors offer as attractive a long-term growth profile as that offered by data storage, which Holon believes needs to maintain 35% annual growth for the next 20 years. Storage equipment providers (hard disc and solid-state drive manufacturers) offer the biggest opportunity.

Storage hardware needs to be replaced by storage providers every five years to ensure data is not lost. Using a 20% (straight-line) depreciation rate on this storage hardware, reaching 1000 ZB of global capacity in 2040 requires annual growth above 70% for the next 20 years. This would allow just 0.1% and 0.4% of annual data generation to be saved.

While existing data storage provides like Amazon, Microsoft and Alibaba provide investors with exposure to this exciting space, storage costs on the existing providers is prohibitively expensive, forcing companies to only keep their most valuable data. Holon believes that Filecoin offers a better approach to store data across a global, decentralised network, improving data security and offering storage at a fraction of the price of existing providers.

With a fully diluted market valuation (using the full 2 billion maximum Filecoin tokens) of US$30 billion, Filecoin trades at less than 1/50th of the current valuation of leading storage providers Amazon and Microsoft. As new storage providers and customers join the Filecoin network, we believe it offers substantial upside for long-term investors. Like you, we’ll be checking the data.

 

1  Holon Tesla Report
2 https://www.statista.com/statistics/970958/worldwide-number-of-electric-vehicles/
3 https://www.itu.int/hub/2020/04/arm-predicts-1-trillion-iot-devices-by-2035-with-new-end-to-end-platform/
4 19 new technology platforms include Blockchain and distributed ledgers, Artificial Intelligence, Virtual Reality, Augmented Reality, Machine Learning, Cloud and edge computing , Digital Twin technology, Natural language processing, Voice interfaces and chatbots, Computer vision / facial recognition, Robotics, 5G & 6D networks, Genomics and Gene Editing , Digital platforms, Drones / UAVs, Cybersecurity, Quantum Computing, Robotic Process Automation (RPA), 3D Printing / additive manufacturing, Nanotechnology and materials science
5 https://holon.investments/how-a-deluge-of-data-from-electric-vehicles-will-create-a-global-data-storage-capacity-crisis/
6 https://spec.filecoin.io/#section-systems.filecoin_token.block_reward_minting.baseline-minting
7 https://www.itu.int/hub/2020/04/arm-predicts-1-trillion-iot-devices-by-2035-with-new-end-to-end-platform/

 

Disclaimer

This article has been prepared by Holon Investments Australia Limited (ABN: 45 648 884 164, AFS Licence No: 532669) (“Holon”). The information provided in this article is general in nature and does not constitute investment advice or personal financial product advice. This information has not taken into account your investment objectives, particular needs or financial situation. Before acting on any information contained in this article, each person should obtain independent taxation, financial and legal advice relating to this information and consider it carefully before making any decision on recommendations.  Holon Filecoin Fund: The responsible entity for the Holon Filecoin Fund (ARSN 659 090 614) (the Fund) is Holon Investments Australia Limited (ABN: 45 648 884 164, AFS Licence No: 532669). Holon is the investment manager for the Fund. The content of this article does not constitute an offer or solicitation to subscribe for units in the Funds or an offer to buy or sell any financial product. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. You should also consult a licensed financial adviser before making an investment decision in relation to the Fund. Any investment needs to be made in accordance with our Product Disclosure Statement (PDS) and Reference Guide, and investors should consider the PDS and Reference Guide before deciding whether to invest in the Fund or continue to hold units in the Fund. Applications for units in the Fund can only be made pursuant to the application form relevant to the Fund. Distributors of our products must consider our Target Market Determination (TMD). You can access our PDS, Reference Guide and TMD at holon.investmentsHolon Global Innovations Pty Ltd (HGI) and Holon are wholly owned subsidiary of Holon Global Investments Limited. HGI is a FIL Storage Provider and is positioned as a major player in the Filecoin (FIL) decentralised data storage arena for Asia Pacific. FIL Storage Providers are rewarded in FIL for the provision of data storage capacity. Investing involves risk including the risk of loss of principal. Past performance is not indicative of future performance. Holon, its officers, employees and agents believe that the information in this material and the sources on which the information is based (which may be sourced from third parties) are correct as at the date of publication. While every care has been taken in the preparation of this material, no warranty of accuracy or reliability is given and no responsibility for this information is accepted by Holon, its officers, employees or agents. Except where contrary to law, Holon excludes all liability for this information.

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