It has taken less than a decade for digital twin technology to become a driver of innovation across industries, from manufacturing to healthcare. What if every product, system, and process had a digital twin that mirrored its real-world characteristics? By creating virtual models of physical systems, companies can see how things are working in real time and make better decisions. 

Let’s take a closer look at why investing in digital twin technology is essential for companies that want to stay ahead. We’ll explore how it can be used in different industries, the benefits it provides, and key points to consider when implementing it.

Overview of the Digital Twin Technology 

Digital twins are essentially virtual copies of physical elements. They help us understand and manage these real-world objects better by allowing us to monitor their performance and make improvements. For example, in manufacturing, a digital twin can show how a machine is working and help identify any issues before they become problems. In healthcare, it can help track patient data for better treatment.

Digital twin technology began with NASA’s use of simulations during the Apollo missions in the 1960s and evolved through CAD advancements in the 1980s. Dr. Michael Grieves formally introduced the concept in 2002, and its growth accelerated in the 2010s with IoT enabling real-time data exchange. Now powered by AI, IoT, and 5G, digital twins are revolutionizing industries like smart cities, energy, and healthcare, with significant potential in sustainability and autonomous systems.

By 2035, the global digital twin market is projected to exceed $200 billion - 41%+ CAGR from 2024. What was once a futuristic concept is now a game-changing tool driving efficiency, innovation, and sustainability across industries. From improving manufacturing to enhancing healthcare and making cities smarter, digital twins are paving the way for a more connected and intelligent future.

Sectors Utilizing Digital Twin Technology 

Manufacturing

In manufacturing, digital twins work as follows:

  1. Sensors are placed on machinery and production lines.
  2. These sensors continuously collect data on performance, temperature, vibration, etc.
  3. This data feeds into a digital model of the entire production process.

The model can then:

Healthcare

Digital twins can model individual patients or entire healthcare systems. First, patient data (genetics, lifestyle, medical history) is collected. Then, the data creates a virtual model of the patient's health. Healthcare specialists can then:

  • Simulate how different treatments might affect the patient.
  • Predict potential health issues before they occur.
  • Personalize treatment plans based on the individual's unique characteristics.

Real Estate and Construction

During construction, sensors and cameras capture real-time progress. This data creates a dynamic 3D model of the building. Project managers can then identify potential issues before they become problems, optimize resource allocation and scheduling, and simulate different design options virtually.

Once the building is complete, the digital twin continues to collect data on occupancy, energy use, and maintenance needs, allowing for ongoing optimization.

Energy and Utilities

Digital twins model power plants, grids, and renewable energy systems. Sensors throughout the power generation and distribution system collect data, which feeds into a digital model of the entire energy network. It’s then easier for operators to predict and prevent outages and optimize energy distribution based on real-time demand.

By creating these virtual replicas, businesses can make more informed decisions, predict issues before they occur, and/or optimize their operations in ways that weren't possible before. Which leads to improved efficiency, reduced costs, and better outcomes.

Key Drivers of Digital Twin Growth 

  • IoT and 5G Integration - IoT devices collect real-time data from physical assets, while 5G ensures fast and reliable connectivity. Together, they make digital twins more efficient, scalable, and easier to implement across industries.
  • Operational Efficiency and Cost Savings - Businesses need to streamline operations, reduce downtime, and cut costs. Digital twins help by providing accurate simulations and predictive insights, enabling better processes and proactive decisions that boost productivity.
  • AI and Data Analytics - Advances in AI and data analytics allow digital twins to process complex data, spot patterns, and deliver actionable insights. These tools improve decision-making, predictions, and overall system efficiency.

Strategic Insights for Investors

Digital twin technology offers several key areas for investment, starting with all-in-one software platforms. These combine essential features such as data analytics, IoT, AI & ML, and cloud services. In this regard, NVIDIA's Omniverse is a good example.

Beyond software platforms, industry-specific solutions also present strong investment cases. In manufacturing, for example, predictive maintenance systems (e.g., Ansys Twin Builder) help predict equipment failures, while production line optimization tools (e.g., Siemens Digital Industries Software) improve efficiency on the factory floor. Or virtual product testing solutions, which allow products to be tested in a virtual environment before physical production begins.

Smart cities and infrastructure are also an interesting sector to examine from a digital twins standpoint, whose derived solutions help with urban planning and management, energy network optimization and traffic flow management.

Investment Opportunities in Digital Twin Technology

Key Private Players

  • Matterport - A leader in 3D spatial data and digital twin technology, Matterport allows users to create virtual tours and 3D models of real-world spaces. Its platform is widely used in real estate, construction, and insurance for virtual property tours, documentation, and space planning. The company has raised $573 million from investors like Insight Partners, Northern Light Venture Capital, and Intel Capital.
  • OpenSpace - A construction tech company that offers AI-powered reality capture for building projects. OpenSpace’s platform lets teams create 360-degree visual records of construction sites, helping with remote collaboration, progress tracking, and issue resolution. Using computer vision, it aligns images with floor plans to create an accurate digital twin of the site. OpenSpace raised $120 million in its Series D funding round.
  • Forward Networks - A company that uses digital twin technology to help businesses manage and optimize their network infrastructure. Its platform creates virtual replicas of complex networks, allowing IT teams to visualize, verify, and troubleshoot network performance. Forward Networks’ solution works with major hardware and cloud platforms like AWS, Google Cloud, and Microsoft Azure. The company secured $50 million in Series D funding, with investors like MSD Partners, Goldman Sachs, and Andreessen Horowitz.

Risk Factors 

Implementing digital twin technology requires a significant upfront investment in hardware, software, and skilled personnel. Setting up digital twins involves complex tasks like integrating real-time data and creating accurate models, which can be costly. 

Additionally, digital twins depend on large amounts of real-time data, raising concerns about data privacy and security, especially in industries like healthcare and finance. Ensuring the accuracy of this data is crucial, as poor-quality data can lead to incorrect simulations and inefficiencies. Finally, integrating digital twins with older systems can be challenging, leading to delays, extra costs, and disruptions.

The Bottom Line

We see digital twin technology as a real tipping point for efficiency in industrial process optimization. Plus, with advances in IoT, AI, and data analytics, digital twins are accelerating rapidly. We forecast increasing importance for the high-impact industries we discussed in the article - like manufacturing, healthcare, and transportation - where digital twins can lead to significant cost savings. Prioritize cybersecurity, as robust measures are essential for protecting your investment and building trust with stakeholders.

At Acquinox Capital, we understand the potential of digital twin technology. Through deep market analysis and forward-looking investment strategies, we are committed to helping our clients navigate this dynamic space and capitalize on its transformative power.