- Looking for opportunities beyond today’s leaders: Investors may want to look beyond today’s market leadership to find underappreciated assets poised to benefit from mega forces that can drive long-term growth
- Artificial intelligence (AI): A picks and shovels approach: Integration across industries is driving massive demand for data centers, semiconductors, and raw materials. The AI buildout, projected to continue throughout the decade, will require significant infrastructure investment, presenting investment challenges and opportunities.
- Geopolitics tech and supply chains at the center of a global election year: Geopolitical fragmentation requires an evaluation of overseas dependence and a focus on reshoring. Shifting supply chains and varied demographics create strategic prospects across markets.
Thematic Mid-Year Update: What's next for AI & geopolitics
Jun 25, 2024
KEY TAKEAWAYS
LOOKING FOR OPPORTUNITIES BEYOND TODAY’S LEADERS
We believe investors may want to look beyond today’s market leadership to find underappreciated areas that are well-positioned to benefit from powerful secular tailwinds, or mega forces, that can drive long term growth.
In our Thematic Mid-Year Update, we focus on two mega forces where we believe the most compelling immediate opportunities lie: 1) the transformative potential of artificial intelligence (AI) and it’s catalyzation of a historic capex cycle; and 2) the growing impact of geopolitics on trade and technology amid a wave of elections globally.
ARTIFICIAL INTELLIGENCE: A PICKS AND SHOVELS APPROACH
The rapid integration of AI across various sectors is driving a historic capital expenditure cycle, with significant demand for data centers, semiconductors, and certain raw materials, leading to potential opportunities for operators and suppliers of data centers, a broad range of semiconductors, electric power infrastructure, and critical materials.
However, the increasing demand for power and copper, essential for AI data centers and many aspects of energy and digital infrastructure respectively, could pose challenges, necessitating an overhaul of power infrastructure and addressing copper supply deficits.
GEOPOLITICS: TECH AND SUPPLY CHAINS AT THE CENTER OF A GLOBAL ELECTION YEAR
Geopolitical fragmentation is significantly impacting the global economy, reshaping supply chains, and causing a dispersion in U.S. technology stocks due to rising tensions and trade dependencies.
Meanwhile, manufacturing in the U.S. is experiencing a resurgence due to policies aimed at increasing domestic production and reducing reliance on global supply chains, and trade policy changes are creating new opportunities in emerging markets like Mexico and India.
For more insights and to read about our rationale for the recommendations, download the full Thematic Mid-Year Update
Video 1:55
Our 2024 Mid-Year thematic update focuses on two mega forces that are reaching critical inflection points -- the transformative advancements in artificial intelligence and the growing importance of geopolitics.
These mega forces are reshaping the global economy and, as a consequence, are impacting virtually all investors’ portfolios. So how should investors approach these mega forces for the rest of 2024 and beyond?
First, we believe the opportunity today in AI lies less in the digital world and more in the physical infrastructure supporting this technology. Artificial intelligence has transcended buzzword status and is getting rapidly integrated in businesses across the economy, from healthcare to financials and more. Yet as AI adoption takes off, its emergence is creating tremendous and immediate demand for hardware, for digital infrastructure and for power. Semiconductors, data centers, and even raw materials like copper are becoming the picks and shovels critical to AI's growth with data centers alone requiring as much as $1 trillion of investment by 2030.1
Second, geopolitics is reshaping supply chains and public policy, creating select opportunities. Bipartisan efforts in the US to support domestic production and critical industries like semiconductors and automobiles, are poised to drive a renaissance in U.S. manufacturing.
At the same time, select emerging markets like Mexico and India are even benefiting from growing trade and attractive labor pools. And finally, global competition in technology and AI highlights both the vulnerabilities and opportunities of the S&P 500’s largest sector.2
To learn more about these powerful mega forces and how to potentially capture these opportunities in your portfolio, please visit iShares.com/Insights.
Sources
1: McKinsey & Company, “The semiconductor decade: A trillion-dollar industry,” 4/1/22. Forward looking estimates may not come to pass.
2: Sourced from Morningstar as of 6/12/24. The Information Technology sector holds the largest weight in the S&P 500 TR Index, accounting for 31% of the total.
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Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and the general securities market.
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Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares Fund and BlackRock Fund prospectus pages. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
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Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and than the general securities market.
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