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Disruptive Tech Theme of the Week: 7 Disruptive Themes for 2024

To use a holiday analogy, I have been checking lists and checking them twice to figure out which of next year’s top disruptive investment themes are likely to be nice. As promised in last week’s article on the Top Disruptive Themes of 2023, here are my predictions for 2024, which I could not limit to five, so there are seven magnificent themes to consider.

1. Digital Assets/Blockchain

2024 is likely to be the year of the first spot Bitcoin ETFs early in the year. Later in the year, it seems likely that spot Ethereum ETFs will also be approved. The road to the first spot bitcoin ETF approval has been long and arduous, with the SEC rejecting 33 applications among more than a dozen filers since the Winklevoss twins first sought approval over a decade ago. But with Blackrock entering the pack in June, Grayscale’s court victory over the SEC, and recent approvals for levered bitcoin futures ETFs and Ethereum futures ETFs, a spot bitcoin approval seems inevitable in 2024.

Indeed, industry analysts now peg the likelihood of an approval by early January to be 90%. And the discount to net asset value (NAV) for Grayscale’s GBTC trust has narrowed from 45% at the beginning of 2023 to just 11% today. And Bitcoin, helped by the probability of approval, is up 140%. Quite simply, a U.S. spot bitcoin ETF gives bitcoin legitimacy, eliminating regulatory uncertainty (many compliance departments currently don’t allow it), giving credence to crypto as an asset class, and ensuring strong oversight and investor protections, all in a convenient and familiar vehicle, the ETF.

According to the Digital Asset Council of Financial Professionals, only 12% of financial advisors currently recommend bitcoin to clients today. However, 77% say they plan to if a US spot bitcoin ETF becomes available.

 2. AI and Generative AI

Coming in hot from 2023, generative AI should remain one of the most important themes in 2024. Gartner projects that Artificial Intelligence (AI) will generate 10 percent of all data by 2025. If that forecast is correct, 2024 will be another groundbreaking year for generative AI and AI technologies. And Goldman Sachs reports that generative AI could raise global GDP by 7% in the next decade, having a far-reaching impact on business and society.

Generative AI’s ability to generate content that is indistinguishable from human-created output. To break down communication barriers between humans and machines will produce a sizeable macroeconomic impact, especially with regard to labor productivity. Generative AI is expected to streamline business workflows, automate routine tasks. This will give rise to a new generation of business applications. Goldman estimates that roughly two-thirds of US occupations could be partially automated by AI. But don’t be worried – historically, jobs displaced by automation, have been offset by the creation of new, higher-paying jobs.

ETFs with pure-play exposure to this theme include the ROBO Global Artificial Intelligence ETF (THNQ), the Global X Artificial Intelligence & Technology ETF (AIQ), the TrueShares Technology AI & Deeping Learning ETF (LRNZ), the WisdomTree AI and Innovation ETF (WTAI) and the Roundhill Generative AI and Tech ETF (CHAT).

3. Cybersecurity

2024 should be a big year for cybersecurity. It makes sense that cybersecurity investment will also need to increase as technologies like AI are ramping up in the workplace. Cyberthreats are becoming more sophisticated and may employ AI intelligence to help sidestep standard cyber defense strategies. The proliferation of connected devices further exacerbates security concerns, given their inherent vulnerabilities.

Cybersecurity applications such as automated threat management, cloud security, zero-trust architecture, identity management, behavioral analytics, cyber governance, endpoint protection, cybersecurity-as-a-service, blockchain security, and cybersecurity mesh will all be top cybersecurity priorities in 2024.

There are several ETF plays on cybersecurity. The largest ETF in terms of assets under management is the First Trust NASDAQ Cybersecurity ETF (CIBR), ending the year with over $5.6 billion in assets. The ETFMG Prime Cyber Security ETF (HACK) was the first ETF to focus on the cybersecurity industry, launching in November 2014. Today, it holds a little over $1.5 billion in assets. Other cybersecurity-focused ETFs include the iShares Cybersecurity & Tech ETF (IHAK), the Global X Cybersecurity ETF (BUG), and the WisdomTree Cybersecurity Fund (WCBR).

4. Quantum Computing

Quantum computing is a theme that has been hyped for many years, but 2024 may be quantum computing’s “AI moment.” This emerging technology has the potential to transform computing power as we know it. This allows us to solve complex problems at a previously unimaginable speed and scale. According to Fortune Business Insights, the quantum computing market is projected to grow from $928.8 million in 2023 to $6.5 billion by 2030, with a CAGR of 32.1% during the forecast period.

Quantum processors rely on the mathematics of elementary particles (think physics) to expand computational capabilities, running on quantum circuits instead of the logic circuits of digital computers. Quantum computing will be used for compute-heavy applications. That would include AI, cloud computing, cryptography, drug discovery, genomic sequencing, meteorology, and scientific and financial modeling. IBM unveiled its most powerful 433 qubit (quantum bit) processor quantum computer, named “Osprey,” at the IBM Summit in 2022. And the firm just announced plans to release a new 1,121-qubit Condor processor soon, which will be the first on the planet to exceed 1,000 qubits.

Investors wanting pure-play exposure to quantum computing can look to the Defiance Quantum ETF (QTUM). The ETF is up more than 29% in 2023, benefiting as well from the adoption of artificial intelligence applications. Many key companies involved in quantum computing are also held in more broad-based technology and AI-focused ETFs.

5. Phygital Convergence

Phygital convergence is a disruptive theme I wrote about earlier this year as a Disruptive Theme of the Week, meaning the convergence of the physical and virtual worlds. After attending the U2 concert at the Sphere in Las Vegas, I am more convinced this will be a huge 2024 theme. I caught a glimpse of the future of entertainment, utilizing augmented reality superimposing digital elements in the real world to create a unified art and technology experience. And there was no need to wear VR goggles or glasses. Sphere Entertainment is a holding in the MUSQ Global Music Industry ETF (MUSQ).

Investors can gain broader exposure to the “phygital” trend-holding gaming, metaverse, and Web3-focused ETFs, like the VanEck Video Gaming and eSports ETF (ESPO) and the Roundhill Metaverse ETF (METV). For focused Web 3 exposure, there are the Bitwise Web 3 ETF (BWEB) and the SoFi Web3 ETF (TWEB), neither of which have gathered a lot of assets at $900k and $1.8 million, respectively. However, they were strong performers in 2023, up 74% and 67% each.

It is hard to imagine what future creativity could offer in this realm next year. However, it is exciting to catch the first previews of blended physical and virtual reality. VettaFi research analyst Zeno Mercer believes Microsoft’s acquisition of Activision was less about gaming and more about applying their user interface and design platforms to consumer and enterprise applications. This was referred to as the “rise of Consumer-Prise.”

6. Cancer Vaccines

2024 is likely to also be a breakthrough year for many medical discoveries. Still, some of the most promising results are likely to come from several cancer vaccine candidates flying through clinical trials. Unlike traditional vaccines aimed at preventing a disease from occurring, therapeutic cancer vaccines train the patient’s immune system. This enables T cells to patrol the body for cancer cells and destroy them.

Progress in human genome sequencing has allowed researchers to identify unique cancer signatures and make vaccines encoding these neoantigens. Some of the cancer vaccines in mid- to late-stage development include a Moderna/Merck Melanoma vaccine, BioNTech’s Pancreatic Cancer vaccine, Transgene’s Viral Vector-Based vaccine to treat ovarian and head and neck cancer, OSE Immunotherapeutics cancer vaccine for non-small-cell lung cancer, and Nykode Therapeutics Cervical Cancer vaccine.

ETFs with targeted exposure to this theme include the Range Cancer Therapeutics ETF (CNCR), the iShares Genomics Immunology and Healthcare ETF (IDNA), and the ALPS Medical Breakthroughs ETF (SBIO). 2024 may not be the year we find a cure for cancer. However, cancer vaccines may offer a promising path to get there.

7. New Battery Chemistries

Improving the cost and performance of batteries is a major focus for both the private and public sectors in order to support electric mobility and clean energy storage. Those have become a critical component of the energy transition to renewables.

Although LFP (lithium ferro-phosphate) and NMC (nickel-manganese-cobalt) are the current standard for EV batteries, many new battery chemistries are being explored. That includes cobalt-free (sodium-ion) and solid-state batteries. These trends will likely continue to progress in 2024. Solid-state battery technology is becoming a major topic due to quicker charging times, higher energy density (storage capacity), which equates to longer ranges exceeding 700 miles on a single charge, and greater safety. Solid-state batteries also reduce the demand for battery materials and could reduce battery costs once at scale. Solid State is another disruptive theme I covered earlier in the year.

ETFs with exposure to new battery technology include the Amplify Lithium & Battery Technology ETF (BATT) and the Global X Lithium & Battery Tech ETF (LIT). Both of these ETFs also have exposure to battery materials, such as lithium, which are in near-term oversupply. However, these products’ battery technology and energy storage components should benefit from aligning business and government spending. In turn, this supports innovative battery technology solutions.

As we look out toward 2024, it is interesting to note how many thought we were heading into a recession. With that in mind, many of the transformative themes of 2024, like Generative AI, were surprising. To quote Yogi Berra, “It’s tough to make predictions, especially about the future.”  But in ETF land, it sure is a fund to try!

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