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The Next Big Theme: May 2024

May 17, 2024

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Artificial Intelligence & Technology

AI Infrastructure Ecosystem Continues to Grow and Expand

Hyperscalers are incrementally prioritizing in-house AI chips. Meta unveiled its latest AI accelerator chip, Artemis, which is designed to manage the increasing computing demands of AI applications on Facebook, Instagram, and WhatsApp.1 Produced by Taiwan Semiconductor Manufacturing Company, Artemis offers three times the performance of Meta’s initial processor, enabling the company to decrease its dependency on Nvidia’s chips and cut energy costs.2 Amidst growing corporate demand, Intel also unveiled its latest AI chip, Gaudi 3. Reportedly Gaudi 3 is more than twice as power-efficient and can run AI models one-and-a-half times faster than the H100 GPU that trained GPT language models like ChatGPT.3 Additionally, Intel plans to manufacture AI chips in a new Ohio factory set to open in 2027 or 2028.4 Nvidia and AMD may be among its customers.5 Google is developing its own custom Arm-based central processing unit (CPU) chips, named Axion, to support AI operations in its data centers.6 Google is also enhancing its Tensor Processing Units (TPU), an alternative to graphics processing units (GPUs) for AI acceleration, to support more intensive AI tasks.7

Defense Technology

Next-Generation Missile Technology to Advance Defense Systems

Raytheon secured a $344 million contract to develop two missile variants, the SM-2 Block IIICU and SM-6 Block IU.8 Both variants utilize a newly designed common guidance section that includes advanced electronics and software to direct the missile to its target.9 These variants will also feature a new target detection device, an independent flight termination system, and a unified electronics unit.10 The integration of these systems allows for the manufacturing of both missiles on a single production line, enhancing flexibility, scalability, and cost-efficiency.11 This initiative represents a significant advancement, enabling Raytheon to boost the production speed and efficiency of vital weapon systems for the U.S. Navy and its allies. Additionally, this initiative marks the inaugural deployment of Standard Missile active radar technology to U.S.’s international allies, heralding a new era in defense collaboration.12 The Australian arm of Lockheed Martin also inked a USD $320 million contract to build the country’s Joint Air Battle Management System, considered foundational to the county’s future air defense through the intercept of hostile missiles and aircraft.13

Cloud Computing

Generative AI Delivered a Boost to Cloud Computing Revenues

Cloud computing revenues for tech giants Amazon, Alphabet, and Microsoft rebounded in Q1, driven by strong corporate spending on AI-related investments following a slowdown in 2023 caused by IT cost optimization efforts. Microsoft’s Azure cloud segment rose 31% year-over-year (YoY), compared to 30% in the previous quarter, with 7 percentage points of the gain attributed to AI.14 Amazon Web Services reaccelerated to 17% YoY growth and Google’s cloud revenue grew 28% to $9.57 billion, with the segment’s operating income more than quadrupling to $900 million.15,16 Foundational cloud infrastructure has shown healthy growth with corporations more open to long-term investments, which is likely to support the downstream adoption of generative AI. We believe hyperscale cloud solution providers are well positioned to benefit from this trend, which we expect to remain strong in 2024 and 2025. We also expect it to have positive implications for the broader cloud software ecosystem, data management platforms, and vendors of critical solutions like cybersecurity.

Robotics & Artificial Intelligence

New Humanoid Robots Show Their Rapid Evolution

Boston Dynamics unveiled a new all-electric version of its Atlas humanoid robot, just one day after announcing the retirement of its previous hydraulic model.17 The robot boasts a significantly enhanced range of motion, with swiveling joints that enhance its strength, dexterity, and agility.18 These improvements make it better suited for performing hazardous or repetitive tasks. The new Atlas retains a human-like form, but Boston Dynamics aims for the robot’s movements to exceed human capabilities by optimizing its movement efficiency for task completion. The previous model was limited to human motions.19 Apple is also exploring the development of personal home robots and a tabletop device that uses robotics to adjust a display screen.20 Though the full scope of this early-stage initiative is unclear, we believe that robotics could enable Apple to gain a greater foothold in consumers’ homes and capitalize on advances in artificial intelligence.

CleanTech

Renewable Energy a Focus Amidst Growing Demand for AI and Data Centers

Microsoft partnered with Brookfield Asset Management and its Brookfield Renewable affiliate in a deal worth over $10 billion to enhance renewable energy capacity.21 The deal, the largest of its kind, will concentrate on developing wind, solar, and innovative carbon-free energy sources.22 Brookfield will provide 10.5 gigawatts (GW) of renewable energy to Microsoft between 2026 and 2030 across the U.S. and Europe.23 To put this amount in context, 10.5 GW is triple the 3.5 GW currently used by data centers in Northern Virginia, the world’s leading data center hub.24 The initiative comes at a critical time in the United States, where electricity demand is escalating due to advancements in AI, expansions in semiconductor and battery production, and the electrification of the national vehicle fleet. Following a decade of stable consumption, total electricity consumption in the United States is projected to increase 20% by the end of the decade.25

Video Games & Esports

Gaming Industry Looks to Advertising to Supercharge Growth

Roblox introduced virtual billboards with video advertisements in its latest move to monetize its free-to-play games. These ads, showcasing brands like Walmart and Warner Brothers, will appear as they do in real life and target Gen Z users, who make up half of the platform’s 71.5 million daily active users.26 The move aligns with a growing trend among gaming platforms to use advertising as a means of revenue diversification. A study by the Interactive Advertising Bureau (IAB) identified in-game advertising as one of the top investment growth areas alongside digital video. Notably, 86% of advertisers surveyed noted that advertising is a growing area of importance, and 40% confirmed plans to increase spend on games advertising in the coming year.27 As gaming’s popularity in the United States continues to surge, a market that already has 213 million gamers, we expect games advertising to become an increasingly reliable platform for advertisers.28 In-game ad spend is projected to reach $11.5 billion by 2027, up from $8.5 billion in 2024.29

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: Consumer Economy, Disruptive Technology, Infrastructure & Environment, Thematic

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Investing involves risk, including the possible loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments may be subject to higher volatility. The funds are non-diversified.

The companies in which the Disruptive Technology Funds invest may be subject to rapid changes in technology, intense competition, rapid obsolescence of products and services, loss of intellectual property protections, evolving industry standards and frequent new product productions, and changes in business cycles and government regulation.

Video Game and Esports companies are subject to risks associated with additional regulatory oversight with regard to privacy/cybersecurity concerns, shifting consumer preferences, and potential licensing challenges.

CleanTech companies may be slightly affected by fluctuations in energy prices and in the supply and demand of renewable energy, tax incentives, subsidies and other governmental regulations and policies.

Carefully consider the Funds’ investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Funds’ summary or full prospectus, which may be obtained by calling 1.888.493.8631, or by visiting globalxetfs.com. Please read the prospectus carefully before investing.

Global X Management Company LLC serves as an advisor to Funds. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated with Global X Management Company LLC or Mirae Asset Global Investments.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Beginning October 15, 2020, market price returns are based on the official closing price of an ETF share or, if the official closing price isn’t available, the midpoint between the national best bid and national best offer (“NBBO”) as of the time the ETF calculates current NAV per share. Prior to October 15, 2020, market price returns were based on the midpoint between the Bid and Ask price. NAVs are calculated using prices as of 4:00 PM Eastern Time. The returns shown do not represent the returns you would receive if you traded shares at other times.

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