5G Digital Infrastructure ETF Report | May 2024

5G ETF Key Takeaways

  • The Digital Infrastructure and Connectivity index took some macro signals in April and ended the month at -5.65%. From an advance/decline perspective, there was broad participation as 49 names traded off while only 10 posted gains during the month.
  • Data Centers led from a sector perspective producing the only positive sector return in April propped up by top ten contributors GDS Holdings (GDS-US) [22.71] and VNet Group (VNET-US) [9.03%].
  • Despite the overall down month, the list of top 10 contributors saw representation from all sectors.
  • Digital Processing name Zaram Technology (389020-KR) [24.97%] topped the leaderboard again in April, as investors continued to respond positively to the company’s March acquisition of Lightworks Technology.
  • Digital Processing name Intel (INTC-US) [-31.02%] was the index’s worst performer after the company presented a lacklustre quarter result and more importantly for investors, provided sombre forward guidance.

Source of all performance data: Tematica Research / Bloomberg. Data as of 30.04.2024. Please note that all performance figures are showing net data. Past performance is not indicative of future performance and when you invest in ETFs your capital is at risk.

Macro Outlook

“Amazon.com Plans to spend almost $150 billion in the coming 15 years on Data Centers, giving the cloud-computing giant the fire power to handle an expected explosion in demand for artificial intelligence applications and other digital services. The spending spree is a show of force as the company looks to maintain a grip on the cloud services market, where it holds about twice the share of No. 2 player Microsoft Corp.”[1]

“The wireless telecommunications industry witnesses a year of unprecedented growth and innovation, propelled by the unstoppable momentum of 5G technology. In 2023, adoption of 5G connections accelerated, reaching 1.76 billion globally by adding 700 million, according to 5G Americas, the voice of 5G and beyond in the Americas, and data from Omdia… Global 5G connections are projected to skyrocket to 7.9 billion by 2028, with North America forecasted to boast an impressive 700 million 5G connections by the same year.”[2]

“The global satellite data services market, valued at US $6 billion in 2020, is projected to skyrocket to $45 billion by 2030. Dominated for decades by a few public and private entities with limited and costly entry points, the space sector is rapidly expanding. And this maturation of space infrastructure is creating new opportunities for many companies to capitalize on the value of space data.”[3]

“The United States will partner with Mexico to explore semiconductor supply chain opportunities, the State Department said on Thursday, as the Biden administration pushes to reduce reliance on China and Taiwan for the technology. The collaboration will take place as part of the U.S. CHIPS Act, a 2022 law that created a $500 million fund for developing the semiconductor supply chain through initiatives with allies and partners.”[4]

“Cloud infrastructure spending continues to accelerate towards more robust configurations mainly fueled by the explosion of AI-related investments,” said Juan Pablo Seminara, research director, Worldwide Enterprise Infrastructure Trackers at IDC. “Even though some caution remains on the socio-political side, the improvement in economic prospects contribute to a very positive spending outlook for 2024 and 2025 where cloud-based spending is expected to rebound at double-digit growth rates.”[5]

“Canada is launching a fund to boost its artificial intelligence sector and creating a new AI safety institute as Prime Minister Justin Trudeau continues to roll out spending announcements in advance of a new budget. The government unveiled a C$2.4 billion ($1.8 billion) package of measures related to artificial intelligence on Sunday. The centrepiece is C$2 billion for “computing capabilities and technological infrastructure” that can accelerate the work of AI researchers, startups, and other firms, according to a statement.”[6]

“The 6G market size is expected to see exponential growth in the next few years. It will grow to $20.46 billion in 2028 at a compound annual growth rate (CAGR) of 29.3%. The expansion anticipated in the forecast period can be credited to sustainable and green communication, spectrum innovation, concerns about security and privacy, global standardization efforts, and industry-specific requirements.”[7]

“Data center demand in North America shows no sign of slowing over the next 12 months, with pricing approaching record levels according to reports from JLL and CBRE. In the report by JLL, the company’s managing director of data center markets, Andy Cvengros, said “Demand continues to be at all-time highs, and data center growth is rapidly expanding from core markets in search of power.”[8]

These and other developments keep us optimistic that while we are going through some economic uncertainty, we remain excited about funding beginning to flow for promised infrastructure spending. That legislation and other bills will spur more demand for bandwidth, processing, and storage and reinforce the Virtuous Circle. This focus on the development of a nation’s digital infrastructure as vital to its future competitiveness is evident in many countries around the world, and as we look forward to emerging technologies, it will only become more critical.

5G ETF Performance Table
As of 30.04.2024

1M3M6MYTD12M3YSI
Digital Infrastructure and Connectivity UCITS ETF -5.65%4.53%28.63%2.91%25.14%-5.02%19.44%
Tematica BITA Digital Infrastructure and Connectivity Index-5.65%4.65%29.27%3.08%26.04%-3.25%22.35%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/04/2024.

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. When you invest in ETFs and ETCs your capital is at risk.

[1] https://www.bloomberg.com/news/articles/2024-03-28/amazon-bets-150-billion-on-data-centers-required-for-ai-boom

[2] https://finance.yahoo.com/news/global-5g-connections-surge-1-163000466.html

[3] https://www.pwc.com/us/en/industries/industrial-products/library/space-economy-data-driven-business-growth.html

[4] https://www.reuters.com/technology/us-mexico-partner-semiconductor-supply-chain-development-2024-03-28/

[5] https://www.idc.com/getdoc.jsp?containerId=prUS52001524

[6] https://www.bloomberg.com/news/articles/2024-04-07/trudeau-unveils-1-8-billion-plan-to-boost-ai-sector-in-canada

[7]https://www.researchandmarkets.com/reports/5948604/6g-global-market-report?utm_code=lcxc73&utm_exec=jocamspi

[8] https://www.datacenterdynamics.com/en/news/ai-demand-and-limited-capacity-drive-us-data-center-prices-up-19/

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