Pictet Research Institute

According to a new research report on ‘Demographics and Technology’, launched today by the Pictet Research Institute, this demographic shift is opening the door to a new era – one defined by automation, artificial intelligence (AI) and the reconfiguration of productivity. The timing of technological evolution is not only fortuitous – it may be decisive. The economies that embrace automation and AI early, and with strategic intent, are likely to emerge stronger, moreresilient and better positioned for long-term growth.

Dr. Maria Vassalou, PhD, Head of the Pictet Research Institute, said: “Ageing economies face a stark choice: do nothing and decline, or transform and continue to grow. Fortunately, automation and AI can go a long way to counterbalance the shrinkage of the labour force, and the timing of their evolution is opportune.”

“We’re not just witnessing a demographic shift – it’s a redefinition of economic structure,” she added. “As consumption patterns evolve and labour becomes increasingly scarce, the sectors that can harness automation to meet the needs of ageing populations will be the ones that thrive. This is not a temporary adjustment; it’s a long-term transformation that will shape how capital is allocated, how productivity is measured, and ultimately, how growth is achieved.”

Demographics: a global inflection point

By 2050, all major advanced economies will see a sharp rise in elderly dependency ratios. Japan and China are at the forefront, with working-age populations set to contract dramatically. Fertility rates continue to fall, and while immigration offers some relief in countries like Canada and the US, the overall trend is clear: the demographic dividend is over.

This shift is already reshaping consumption. As people get older their spending tilts toward housing, healthcare and food – sectors that are both essential and increasingly amenable to automation. Meanwhile their demand for transport, clothing and recreation declines.

Automation: from substitution to productivity

Technology is stepping in where labour is stepping back. The adoption of robotics typically follows a two-phase trajectory: substitution robots, which replace scarce labour; and productivity robots, which enhance output and efficiency.

Japan, having faced demographic pressures earlier than most, has already transitioned into the productivity phase. Other economies, particularly in Europe and East Asia, remain mostly in the substitution phase, with significant room for improvement.

AI is about to enter its scaling phase. The infrastructure – cloud computing, labelled datasets, adoption of GPUs, circuits that cope with computationally intensive tasks – is being put in place in several economies. Early applications in diagnostics, logistics and financial services are showing signs of enhancing productivity. If adoption continues, AI could add between 0.4% and 1.5% to annual GDP growth in advanced economies by the 2030s.

Sector winners and losers

The demographic and technological shifts underway are not only economic – they are structural, reshaping the architecture of global growth. Investors must therefore look beyond cyclical trends to structural inflection points. Sectors such as housing, healthcare, and food production will be key beneficiaries of this dual transformation.

For instance, housing demand is rising not just in volume but in complexity, with ageing populations requiring smart home technologies and age-adaptive infrastructure. Healthcare is evolving from reactive treatment to proactive longevity solutions, creating opportunities in medical devices, pharmaceuticals, and wellness tech. Meanwhile, food – an inelastic necessity – is increasingly automated, with AI and robotics enhancing efficiency in production and packaging.

For investors, this means that traditional sector classifications may no longer suffice. Instead, portfolios should be constructed around themes that align with demographic demand and automation potential. Companies that operate in sectors conducive to AI and robotics, and that serve ageing consumers, are likely to enjoy both demand tailwinds and productivity gains – driving superior earnings growth and margin expansion. These are not just growth stories; they are resilience plays in a structurally shifting economy.

Markets poised to benefit

Yet exposure to these trends is not enough. The ability to scale innovation and capture productivity gains depends on a third critical factor: infrastructure readiness. Economies with robust digital infrastructure, skilled workforces, and supportive policy environments will be better positioned to convert demographic headwinds into competitive advantage.

For investors, this implies geographic distinction: not all countries will benefit equally. For example, Japan’s early automation adoption has enabled it to transition from labour substitution to productivity enhancement, while parts of Europe still lag due to underinvestment in enabling technologies. This has direct implications for asset allocation. Investors should prioritise regions and companies with the institutional capacity to absorb and scale AI and automation. That means looking for signs of investment in cloud infrastructure, data systems and workforce retraining.

It also means understanding the timing of AI’s productivity J-curve: economies currently in the trough may offer contrarian opportunities if they are poised to emerge with enhanced productivity. Structural resilience – defined as the ability to adapt to demographic and technological change – is becoming a key investment criterion. Portfolios should tilt toward firms and geographies that are not just exposed to change, but equipped to lead it, with the potential to deliver outsized returns as the global economy reconfigures.