What are the Top Performing Investment Themes in 2024?

The year 2023 has been a boasting year for many investors as the S&P 500 rebounded over 24% and many investment themes soared even higher. In many ways, last year was well summarized by breakthrough announcements in AI related industry and the resurgence of Bitcoin. The geopolitical risk from Ukraine war and nuclear’s growing role as low carbon energy source have also bring forth the investment interest in nuclear energy related ETFs.

Top Performing ETFs in 2023

The surge in stock prices for companies engaged in AI development and deployment has propelled tech-oriented thematic ETFs focused on this sector to become the top performing themes in 2023. Simultaneously, blockchain funds, mostly comprising cryptocurrency miners, thrived amid the crypto boom in H2 2023. ETFs centered on nuclear energy, with uranium miners, also grew due to rising uranium prices. These trends reflect investors’ interest in emerging technologies and energy sources.

Following charts are the top performing themes in the United States and Europe in 2023 as recorded by trackinsight.com, centered around AI and nuclear energy related themes.

Source: trackinsight.com

In 2023, blockchain ETFs surged with 82% returns, driven by the sharp rise in bitcoin prices. These ETFs mainly hold bitcoin mining firms, as direct bitcoin ETFs weren’t yet approved by the United State regulators yet. However, by early-2024, the regulators approved 11 spot bitcoin ETFs, attracting $10 billion in assets within 20 days. Next-generation internet ETFs, including IoT and new payment methods, also saw significant growth following the surge. 

With 49% returns, AI and big data ETFs were another top performing investment theme. Driving these returns were companies like chipmaker Nvidia, whose share price jumped by 239% in 2023 thanks to its technology being fundamental to powering AI models. 

Nuclear energy ETFs had a standout year due to uranium prices hitting 15-year highs, reflecting investor optimism amid global efforts to decarbonize energy. In fact, 63 new reactors across countries including Japan, Turkey, and China are planned for construction amid higher global demand.

Top Investment Theme by Net Flows

Although blockchain ETFs placed first as the top performing theme, when it was broken down by net flows, Robotics & Automation ETFs has the highest net flows of investment amounting a total of US$1,303 million in 2023. ETFs focused on robotics and automation experienced significant net inflows, reflecting increased adoption of these technologies in various sectors such as factories, healthcare, and transportation.

Source: visualcapitalist.com

The advancement of AI, particularly large language models, played a pivotal role in enhancing robotics capabilities. For example, Microsoft’s plan to develop a ChatGPT-powered robot demonstrates the growing importance of AI in enabling more sophisticated tasks.

Similarly, AI, big data, and blockchain ETFs also attracted substantial inflows.

Notably, ETFs centered on consumer growth in emerging markets witnessed strong inflows, driven by the expanding middle class in countries like India and China, presenting promising growth prospects. By 2024, an estimated 113 million individuals are expected to join the global middle class, primarily in Asian countries.

Momentum to Continue in 2024

The positive momentum in investment themes like blockchain and next-generation internet ETFs has persisted into 2024. These themes often encompass significant trends capable of reshaping entire sectors and industries, driven by factors like technological advancements, geopolitical shifts, and economic conditions.

Historically, select investment themes have defined each decade, reflecting the evolving landscape shaped by various factors. However, the sustained performance of these themes in the coming months may face challenges from various external factors, including global economic fluctuations and potential inflationary pressures. 

Despite these uncertainties, the prevailing investor demand and the underlying structural changes within sectors indicate a potential for continued momentum in 2024 and beyond.