Tech Megatrends ETF Report | September 2024

Equal Weight ETF Key Takeaways

  • ITEK returned -0.63% in August and has returned 4.47% YTD.
  • Fed’s pending rate cuts starting in mid-September – potentially positive tailwind for ITEK.
  • ITEK P/E valuations remain below 20, attractive vs. Nasdaq at 32X.
  • For 2024, best subthemes have been Digital Entertainment, Cloud, Cybersecurity, Robotics & Blockchain.
  • Digital Entertainment, Cybersecurity, and Cloud were the best August performers. Blockchain a laggard.
  • Global mix: US 58.9%, China 11.2%, Japan 8.6%, Germany 2.9%, & Australia 4.9%.
  • 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).
  • Tech Convergence and AI – boosting many ITEK holdings beyond Magnificent 7.
  • Social Media, Cloud, AI, Cybersecurity, EVs, Robotics, and Streaming all interlinked – boosting usage and deals.
  • ITEK potentially well positioned for broader Tech rally in 2024 beyond Mega-Caps.
  • Soft landing will help Tech spending and earnings as economic confidence grows.
  • Top 15 leaders for each Megatrend subtheme – all established firms.
  • Top 5 holdings less than 9% weight; Top 10 under 14%. Nasdaq approaches 40% and 55% respectively.
  • Mega-Cap weight still below 8% (Nasdaq 49%).
  • Equal Weight top holdings – offers broad diversity vs. 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 31/08/2024. 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

  • Fed rate cuts expected to boost M&A deals – across main ITEK holdings: Large-Caps, Mid-Caps & Small-Caps.
  • Tech gains broadening beyond Mega-Caps as Fed rate cuts likely – helps equal weight approach.
  • Three Fed rate cuts before year-end 2024 – as inflation falling and unemployment rising.
  • Tailwind for Tech stock valuations beyond Magnificent7/FAANGs.
  • ITEK holdings still 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 & Cybersecurity.
  • Over $2tn spending in AI expected within decade, boosting Cloud spending.
  • Social Media boosted via gaming and video streaming to mobile (expected to double in 3yrs).
  • Online Gaming dominated by Mobile – boosting Digital Entertainment/Videos.
  • US Chips Act and $1tn Infrastructure Bill boosts EVs and big onshoring trends.

Subtheme Returns – August

ContributionContribution (%)Average Return (%)Sum of Weight (%)Count*
Blockchain-2.23%-15.24%14.33%15
Robotics & Automation-0.09%-2.95%11.61%15
Genomics0.22%0.70%12.01%16
Cyber Security0.77%6.43%11.87%15
Future Cars0.04%-0.12%11.38%15
Digital Entertainment0.53%2.33%13.08%15
Cloud Computing0.16%1.29%12.90%15
Social Media0.14%-0.65%12.83%15
Total-0.44%

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

Largest Contributors – August

HOLDINGSIndex CategoryContribution (%)Return
(%)
Average Weight (%)
FORTINET INCCyber Security0.21%32.17%0.84%
PELOTON INTERACTIVE INCSocial Media0.19%30.90%0.66%
NORTHERN DATA AGBlockchain0.18%29.76%0.64%
PB FINTECH LTDSocial Media0.21%21.97%1.12%
TREND MICRO INCCyber Security0.19%20.44%0.90%
LG ENERGY SOLUTIONFuture Cars0.14%19.75%0.70%
CROWDSTRIKE HOLDINGS INCCyber Security0.11%19.54%0.64%
BEIGENE LTDGenomics0.14%19.04%0.88%
HANSOH PHARMACEUTICAL GROUP COGenomics0.17%16.86%1.10%
TRADE DESK INC/THE -CLASS ADigital Entertainment0.14%16.30%0.94%
LIFE360 INC-CDISocial Media0.32%15.46%1.83%
KONAMI GROUP CORPDigital Entertainment0.17%15.21%1.00%
MARVELL TECHNOLOGY INCRobotics & Automation0.10%13.83%0.76%
CYBERARK SOFTWARECyber Security0.09%11.84%0.85%
PALO ALTO NETWORKS INCCyber Security0.10%11.70%0.89%
NETFLIX INCDigital Entertainment0.10%11.62%0.90%
ZSCALER INCCyber Security0.07%11.50%0.63%
KRAFTON INCDigital Entertainment0.15%11.22%1.13%
INTUITIVE SURGICAL INCRobotics & Automation0.10%10.80%1.01%
SAMSUNG SDI CO LTDFuture Cars0.09%10.80%0.70%
BOOZ ALLEN HAMILTON HOLDING CORPCyber Security0.08%10.79%0.84%
META PLATFORMS INCSocial Media0.08%9.79%0.87%
TAKE-TWO INTERACTIVE SOFTWARE INCDigital Entertainment0.06%7.43%0.84%
ILLUMINA INCGenomics0.05%7.18%0.75%

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

Equal Weight ETF Performance
As of 31.08.2024

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 31/08/2024
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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