Cannabis, solar, lithium trends remain in their infancy, investors best pay attention
A lot has happened in just these last two years. Despite the widespread damage caused by Covid-19, the crisis accelerated the pace of technological advancements along with our ability to adapt to the latest changes.
A survey by McKinsey & Co found that Covid-19 sped up the adoption of digital technologies by several years. And it’s the combination of multiple technologies that are resulting in a wave of innovation across multiple industries, much of which would not have been possible even a few years ago.
The structural trends driving new tech advancements have a very real impact on equity markets and in most cases the raw minerals required to produce them. Covid-19 along with the global shift to decarbonisation and the Ukraine war has led to advances in AI, robotics, automation, semiconductors, electric vehicles, renewable power generation, digitization, cashless society, blockchain and the metaverse.
Mirae Asset Management’s ETF arm, Global X, released its monthly insight into thematic ETFs, touching on some of the biggest themes it expects for the year. These include:
➔ Electric Vehicles
➔ Robotics & Artificial Intelligence
➔ Internet of Things
Global X is bullish on the electric vehicle (EV) market saying, “sales continue to surge, with companies topping historical sales. Recent figures show that Chinese vehicle manufacturer BYD sold more combined electric vehicles and plug-in hybrid electric vehicles (PHEVs) than Tesla in the first half of 2022. BYD sold 641,000 of these new energy vehicles, a 315% increase over the same period last year.1 Comparatively, Tesla sold nearly 565,000 vehicles in the first half.”
While the internal combustion engine gets its energy from burning petrol, an electric vehicle is all about its powerful battery. And now, leading car manufacturers use lithium as the main component in a lithium-ion battery. Global X is ultra-confident about the lithium market saying it is being “boosted by rapid demand growth, lithium-focused companies around the world increased expenditures by 50% to record highs in 2021. The spending uptick can be attributed largely to exploration spending meant to help diversify future sources of lithium supply. Global investment is expected to remain strong throughout 2022.”
Another sector also exhibiting similar trends, is robotics and artificial intelligence designed to streamline industrial production. Global X says “industrial robots reported record preliminary sales in 2021 with 486,800 units shipped globally, a 27% increase from 2020.11 The largest leap
in demand occurred in the Asia/Australia region, where installations were up 33% to 354,500 units.” Leading the space is Amazon’s sub-brand Proteus, which has created a fully autonomous mobile robot that can move large carts through warehouses while safely navigating around workers.
Analysts expect cannabis sales to grow exponentially due to the growth in legalised markets as more consumers become educated on the benefits of cannabis for pain relief, lowering stress and having a more restful sleep. California alone is projecting sales of US$7.6bn and Washington state with $1.5bn.
Following this is the booming solar panel industry. The sector has moved from once being the most expensive form of renewable energy to now becoming the cheapest source of energy. Yes, cheaper than coal and gas in most major countries. And finally, the potential of Blockchain technology is still in its infancy and will evolve further with tokenization of everything. Blockchain technology has the potential to impact almost everything we do.
The applications of Blockchain are virtually limitless but in the very near future, it will revolutionise lending, investing, raising capital, payments, security, consumerism, business models, housing and digital property. While high inflation, rising interest rates, supply chain disruptions, sanctions on Russia and rising energy prices are big drivers of markets, the above-mentioned technological trends will shape markets for the foreseeable future. These trends tend to long-term trends that reshape an industry.