Tech Megatrends ETF Report | August 2024

Equal Weight ETF Key Takeaways

  • ITEK benefiting from broadening market gains, returning 0.63% in July.
  • ITEK P/E valuations remain below 20, potentially attractive given Fed rate cuts in September seem likely.
  • Tech convergence and AI are boosting many ITEK holdings beyond Magnificent 7.
  • Social media, cloud, AI, cybersecurity, EVs, robotics, and streaming are all interlinked, boosting usage and deals.
  • Genomics returned 13%, blockchain 3%, and digital entertainment 1.3%.
  • Cloud returned -0.2%, cybersecurity -0.3%, social media -0.5%, and robotics and automation -0.6%.
  • For 2024, the best subthemes have been digital entertainment (up 17.3%), blockchain (up 16.2%), and cloud (up 5.2%).
  • Global mix: US 59.7%, China 11.1%, Japan 8.2%, Canada 2.8%, and Australia 4.8%.
  • Fast adoption of OpenAI, ChatGPT, and BARD AI – continues boosting cloud computing and AI spend.
  • Equal weight across 8 subthemes (12.5% per theme; 120 total holdings, 15 per subtheme).
  • ITEK potentially well positioned for broader tech rally in 2024 beyond mega-caps.
  • Fed rate cuts expected to boost M&A deals across ITEK holdings: large-caps, mid-caps, and small-caps.
  • Soft landing would help tech spending and earnings as economic confidence grows.
  • Top July Performers spread across all 8 subthemes – see below.
  • Top 15 leaders for each megatrend subtheme are all established firms.
  • Top 5 holdings less than 9% weight; Top 10 under 15%. Nasdaq approaches 40% and 55% respectively.
  • Mega-cap weight below 8% (Nasdaq 49%).
  • ITEK’s low valuation multiples continue versus expensive Nasdaq.
  • Top holdings equal weight – much broader than Nasdaq and many active tech funds.
  • Unlike 100% US-centric Nasdaq and many tech indices / funds.

 

Source of all data: Gins Global / Bloomberg as of 31/07/2024. Additional sources available upon request. 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

  • Tech gains broadening beyond mega-caps as Fed rate cuts likely – helps equal weight approach.
  • Likely Fed rate cuts before year-end 2024, as inflation falling and unemployment rising.
  • Tailwind for tech stock valuations beyond Magnificent 7 / FAANGs.
  • ITEK holdings still have relatively cheap valuations, majority trading at PEs below 20x.
  • Many ITEK stocks remain below 2021 levels, undervalued versus Magnificent 7.
  • Big AI spending boosting big tech values and cloud providers.
  • AI convergence across tech space – positive for cloud, social media, gaming, future cars, and cybersecurity.
  • Over $2tn spending in AI expected within a decade. Expect more M&A deals.
  • Social media boosted via gaming and video streaming to mobile. Expected to double in three years.
  • Online gaming dominated by mobile – boosting digital entertainment / videos.
  • US Chips Act and $1tn Infrastructure Bill boosts EVs and big onshoring trend.

Subtheme Returns – July

ContributionContribution (%)Average Return (%)Sum of Weight (%)Count*
Blockchain0.3%3.0%16.8%15
Robotics & Automation-0.6%-5.9%12.1%15
Genomics1.3%12.9%10.6%16
Cyber Security-0.3%-2.0%11.2%15
Future Cars0.1%0.2%11.6%15
Digital Entertainment0.4%1.3%12.2%15
Cloud Computing-0.2%-0.7%12.6%15
Social Media-0.5%-2.4%12.8%15
Total0.63%

*Count following rebalancing.

Source of all data: Solactive. Past performance is no guarantee of future performance.

Largest Contributors – July

HOLDINGSIndex CategoryContribution (%)Return (%)Average Weight (%)
REPLIGEN CORPGenomics0.17%32.75%0.53%
LEGEND BIOTECH CORPGenomics0.15%27.32%0.63%
CIPHER MINING INCBlockchain0.29%26.02%1.40%
MATCH GROUP INCSocial Media0.17%25.54%0.71%
RIVIAN AUTOMOTIVE INCFuture Cars0.21%22.28%1.12%
SARTORIUS AG PREFGenomics0.10%19.95%0.52%
BIT DIGITAL INCBlockchain0.19%19.81%1.10%
HIVE DIGITAL TECHNOLOGIES LTDBlockchain0.11%18.63%0.74%
ILLUMINA INCGenomics0.10%17.46%0.64%
TESLA INCFuture Cars0.14%17.28%0.93%
BRISTOL-MYERS SQUIBB COGenomics0.09%14.52%0.66%
BEIGENE LTDGenomics0.09%13.92%0.67%
BIO-TECHNE CORPGenomics0.11%13.87%0.81%
GENMAB A/SGenomics0.09%12.03%0.74%
ROBLOX CORPDigital Entertainment0.09%11.58%0.78%
RIOT PLATFORMS INCBlockchain0.06%11.49%0.58%
CHECK POINT SOFTWARE TECH L ORDCyber Security0.09%11.18%0.84%
INTERNATIONAL BUSINESS MACHINES CORPCloud Computing0.08%11.10%0.77%

Source of all data: Solactive. Past performance is no guarantee of future performance.

Equal Weight ETF Performance
As of 31.07.2024

ITEK (Fund)SOLITEK (Index)
1M5.23%5.28%
3M-11.01%-10.94%
6M14.22%14.59%
YTD12.25%12.76%
12M13.93%14.76%
3Y72.48%75.38%
Since Inception (05/10/2018)149.13%157.62%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/07/2024

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.

* The SFDR classifications for the funds are documented in their respective supplements and approved by the Central Bank of Ireland. The supplement for each fund can be found on their respective product page.

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