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The Next Big Theme: July 2024

Jul 25, 2024

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Artificial Intelligence & Technology

Edge AI to Boost to Consumer Devices, Notably Smartphones

Edge AI, which involves processing data locally on devices rather than in the cloud, is expected to have positive implications across a broad range of applications and consumer devices. In our view, AI offers smartphones, a $500 billion annual market, the greatest near-term monetization opportunity among consumer devices by accelerating replacement cycles and increasing AI-related premiums.1 A prime example is Apple’s recent introduction of Apple Intelligence, of a suite of AI-powered features available on new iPhones, iPads, and Macs.2 Notable tools include an enhanced Siri that offers more accurate responses and tasks execution across iPhone apps, powered by in-house large language models (LLMs) and OpenAI’s GPT-4o.3 We expect these generative AI integrations to reverse the downturn in smartphone sales and fuel the next major iPhone upgrade cycle, similar to the impact of 5G on iPhone 12 sales. Importantly, Apple Intelligence will be limited to devices with A17 Pro or M-series chips, representing just 5% of the current iPhone installed base. In other words, 95% of iPhone users will need to upgrade their devices to experience Apple Intelligence.4

Electric Vehicles (EVs)

New Energy Vehicle Sales Surged in China, Helped by Price Cuts

The Chinese EV market is heating up and becoming increasingly competitive for automakers. According to the China Passenger Car Association, Chinese new energy vehicle (NEV) sales, which include hybrids and battery EVs, increased 17% month-over-month (MoM) and 36% year-over-year (YoY) to 790,000 units in May.5 NEVs accounted for 46.88% of total sales, marking May the best month for NEV sales since December 2023.6 Year-to-date, NEVs account for 40.26% of total sales in China.7 This sales surge in sales is largely attributed to price cuts and the introduction of new models from companies like BYD and Nio, both of which reported strong growth in May. Additionally, SAIC and Volkswagen announced a new partnership to jointly develop three plug-in hybrid EVs and two battery EVs for the Chinese market.8 This collaboration builds on VW’s “In China, for China” initiative, which focuses on deepening local partnerships to increase market share in the region. Better-than-expected sales in China helped Tesla report a Q2 deliveries beat. Currently, Tesla is offering zero-interest loans on various models to remain competitive in China.9

U.S. Infrastructure

Rail Transit Systems the Next to Benefit From New IIJA Funding

As the Infrastructure Investment and Jobs Act (IIJA) passes the halfway mark of its five year plan, funds continue to flow to various agencies, including the Department of Transportation (DOT), which recently received $529.7 million in grants.10 The first batch of grants, totaling $343 million, will go toward making rail transit systems in eight states more accessible.11 Among the highlights is $156.6 million to New York’s Metropolitan Transportation Authority (MTA) for subway system improvements.12 The remaining $186.7 million will go towards 91 airport projects across 34 states.13 In total, the IIJA is set to provide $25 billion towards airport project grants over its five-year lifespan.14 Construction starts in the U.S. also rose 10% in May to reach a total of $1.24 trillion.15 The non-building construction segment drove this strong growth, particularly two large-scale projects in the offshore wind and liquifying natural gas (LNG) industries.16 The residential and non-residential building segments registered small declines in total construction starts in May, however all three segments remain up year-to-date.17

Clean and Renewable Energy

AI Energy Demand Creates Opportunity for Renewables

The explosive growth of generative AI has significantly increased data center energy consumptions, and, as a result, emissions. Google’s emissions are 48% higher today than in 2019, and Microsoft’s are nearly 30% higher since 2020.18 AI-powered services demand substantially more computing and electricity than typical online services. By 2030, electricity demand is expected to grow by roughly 20%, with AI-data centers alone adding 323 terawatt hours (TWh) of demand in the United States, seven times New York City’s annual consumption.19 To address this environmental concern, support for clean energy sources like nuclear and solar to be the preferred power choice for data centers is gaining momentum. Nuclear and solar power, which are low-cost and capable of rapid deployment, align with Big Tech’s climate ambitions, which include net-zero carbon emission goals. Among recent initiatives, Amazon, Google, and Microsoft partnered with Duke Energy to accelerate clean energy development in the Carolinas and lower the cost of investment through tariffs.20

E-commerce

E-commerce Giants Enter Low-Priced Goods Categories to Fend Off Growing Competition

In recent years, low-cost international retailers like Shein and Temu have gained a significant foothold in the U.S. market by attracting American consumers with their inexpensive clothing and electronics, among other products. To counter this growing competition, Amazon plans to launch a new discount storefront on its site, dedicated to affordable fashion and lifestyle items.21 It will offer a variety of unbranded products from Chinese sellers, many priced under $20, and deliver them directly from Chinese warehouses to customers’ doorsteps within 11 days.22 This approach is a departure from Amazon’s previous strategy, where Chinese sellers shipped goods to U.S. warehouses before dispatching them to customers. This new approach also contrasts with Amazon’s existing focus on fast deliveries and a wide product range, highlighting the increasing importance of offering low-priced goods for e-commerce companies aiming to stay competitive.

Lithium & Battery Technology

Lithium Demand Remains Strong Despite Recent Supply Demand Imbalances

The International Energy Agency’s (IEA) annual report on critical minerals emphasized that investments into key metals such as lithium, copper, cobalt, and nickel remain essential to avoid potential shortages as the energy transition gains pace.23 For example, current lithium supplies are projected to meet only 50% of forecasted demand by 2035.24 While supplies outweighed demand and dampened lithium prices over the past year, demand for lithium increased by a hefty 30%.25 It was a similar story for many other metals. The National Energy Technology Lab published a study that states that lithium in fracking wastewater and water from natural formations in Pennsylvania could become a significant source. While still in the very early stages of exploration, the new discovery could potentially meet up to 40% of the U.S. lithium consumption.26

THE NUMBERS

The following charts examine returns and sales growth expectations by theme, based on their corresponding ETFs or indices.

KEEP UP WITH THE LATEST RESEARCH FROM GLOBAL X

To learn more about the disruptive themes changing our world, read the latest research from Global X, including:

ETF HOLDINGS AND PERFORMANCE

To see individual ETF holdings and current performance across the Global X Thematic Growth Suite, including information on the indexes shown, click these links:

Appendix: Thematic Expected Sales Growth Graph Indices

AgTech & Food Innovation: Solactive AgTech & Food Innovation Index

Aging Population: Indxx Aging Population Thematic Index

Artificial Intelligence & Technology: Indxx Artificial Intelligence & Big Data Index

Autonomous & Electric Vehicles: Solactive Autonomous & Electric Vehicles Index

Blockchain: Solactive Blockchain Index

Clean Water: Solactive Global Clean Water Industry Index

CleanTech: Indxx Global CleanTech Index

Cloud Computing: Indxx Global Cloud Computing Index

Cybersecurity: Indxx Cybersecurity Index

Data Center & Digital Infrastructure: Solactive Data Center REITs & Digital Infrastructure Index

Defense Tech: Global X Defense Tech Index

E-Commerce: Solactive E-commerce Index

FinTech: Indxx Global FinTech Thematic Index

Genomics: Solactive Genomics Index

Hydrogen: Solactive Global Hydrogen Index

Internet Of Things: Indxx Global Internet of Things Thematic Index

Lithium & Battery Technology: Solactive Global Lithium Index

Millennial Consumer: Indxx Millennials Thematic Index

PropTech: Global X PropTech Index

Renewable Energy Producers: Indxx Renewable Energy Producers Index

Robotics & Artificial Intelligence: Indxx Global Robotics & Artificial Intelligence Thematic Index

Social Media: Solactive Social Media Total Return Index

Solar: Solactive Solar Index

Telemedicine & Digital Health: Solactive Telemedicine & Digital Health Index

U.S. Infrastructure: Indxx U.S. Infrastructure Development Index

Video Games & Esports: Solactive Video Games & Esports Index

Wind Energy: Solactive Wind Energy Index

 

Category: Articles

Topics: Thematic

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