Listen to this post
When we talk about long-term investment trends, we want as much conviction as possible.
We want to identify a stock or an exchange-traded fund (ETF) that offers unique upside and taps into massive waves of capital.
Yesterday, I talked about the expected growth of the electric vehicle industry.
Charging technologies and lithium production will be critical to transitioning to a low-emissions world. Rather than just tapping into one specific company, we could invest in a large basket of stocks in the lithium and battery technology space.
No matter which company wins and gobbles up the most market share in the battery space, we can capitalize on an industry expected to generate $82.5 billion by 2030, according to market intelligence company insightSLICE.
Today, we’ll talk about another ETF in a niche industry that benefits from several massive trends in the economy beyond COVID-19.
The Post-COVID Economy
If the post-COVID economy taught us anything, it’s that we’re facing extreme supply chain challenges. Last year, we witnessed massive runs on products as Americans attempted to adjust to life at home.
We anticipated a prolonged crisis, one that would sap demand for a variety of large purchases like automobiles and small ones like athletic shoes and apparel.
Instead, the economy recovered quickly, and now manufacturers have experienced dramatic rises in lead times and massive bottlenecks in supply chains. As I noted the other day, Costco and Nike both sounded the alarm about long wait times. We’re expecting to hear many companies warning about supply chain concerns during their fourth quarter earnings reports and in their guidance ahead of the holiday shopping season.
The cost of shipping continues to rise despite the longer lead times. A shortage of drivers has accelerated an existing crisis that will continue throughout the decade. And the increasing demand for e-commerce shopping will only create greater strain on the supply chains.
As a result of these trends and factors, we will experience a massive shift in how products are procured, delivered, and sold. Many people think this crisis will lead to longer wait times for products over the years.
I’d argue that companies will rely on technology more than ever to reduce manufacturing and delivery times. Supply chains could see a return to pre-COVID efficiency and even faster delivery times from production to sales.
I know that’s quite a bit to suggest — and it almost feels like a contrarian view.
But when you look at the technologies that are still being brought online, you can envision a future of around-the-clock business-to-business communications driven by artificial intelligence (AI) and data analytics.
I like to remind investors that 4G smartphones drove the business-to-consumer economy of the last decade. 4G transformed the way consumers bought products and communicated with retailers.
But 5G has a bigger, broader purpose. This spectrum truly is the driver of enhanced business-to-business (B2B) communication. In the future, 5G will accelerate artificial intelligence, enable faster communication between machines, and facilitate a global network of supply chain efforts that go far beyond the capacity of human interaction.
Not only will automation, AI, and robotics accelerate the supply chains, but they will also drive down the costs of doing business, increase efficiency, and bolster margins.
AI in the supply chain market is expected to grow at a compound annual growth rate (CAGR) of 45.3% from 2019 to 2027. This is a massive form of growth and a niche sector worth $21.8 billion.
Investors looking to tap into this explosive growth might not even know where to start.
You’ll hear names in the semiconductor space like NVIDIA (NVDA) or Applied Materials (AMAT). Naturally, people will speculate around the cybersecurity space on stocks like CrowdStrike Holdings (CRWD). And big data analytics players like C3.ai (AI) and Palantir (PLTR) are worthy of investigation.
But we want something bigger — and better.
One Niche, Countless Possibilities
We want to tap into the broader trend, and the technologies behind this critical niche. We know that AI is going to revolutionize the supply chain. But if we step back, it’s incredible just how much money is going to pour into this space in many other industries.
Global demand for the semiconductor market will hit $70 billion by 2025, according to Gartner. This figure is up from $23 billion in 2020.
Hyperscale data centers — defined as centers that exceed 5,000 servers and 10,000 square feet, minimum — will be a $21 billion market by 2025, according to Oppenheimer.
AI isn’t just going to impact supply chains. It’s going to impact the entire ecosystem of business-to-business activity. And the potential impact of profits and reduced costs may not be measurable today.
That’s why investors looking to explore the impact of AI, robotics, and 5G can find a lot of value in the Global X Robotics & Artificial Intelligence ETF (BOTZ).
BOTZ connects investors to a variety of different global companies in the AI space, including Upstart Holdings (UPST), Intuitive Surgical (ISRG), NVIDIA (NVDA), and 33 other firms.
I’m expecting that AI will continue to overhaul the U.S. economy in profound and positive ways. BOTZ, which has been in the TradeSmith Finance Green Zone for more than four months and is in an uptrend, is a simple way to ride the wave of innovation in supply chains and other growth drivers of tomorrow’s economy.