How to invest in the next big trends

The rise of artificial intelligence, an ageing global population and a rethink of nuclear power will each have a profound impact on business and the global economy in the years to come. 

All three are examples of megatrends – fundamental shifts in technology or demographics whose impacts will be felt for many years. These trends also present an opportunity for investors to buy thematic ETFs which focus on a major macroeconomic theme by containing stocks of companies that are likely to benefit from that theme. 

Should the trends play out as investors anticipate they can expect to earn good returns in the coming years but as with all investing there are always risks. Prices for thematic ETFs can be volatile and there is always the chance the megatrend they’re focussed on might not have the profound impact investors are expecting. That’s why it’s important to have a diversified portfolio.

Here are three major themes expected to continue growing over the coming years that have the potential to deliver outsized returns for investors. 

Artificial Intelligence (AI) and robotics 

Generative AI – artificial intelligence that can understand natural language questions in written or spoken form and produce text, sound or graphics in response – has opened a world of previously undreamed of possibilities for the technology. 

AI is rapidly moving from a technology of the future to one that individuals and businesses are adopting today for an increasing number of uses. 

A global survey by consulting giant McKinsey & Company revealed that just a year after the introduction of many generative AI tools, one-third of businesses were using gen AI regularly in at least one business function. 

Most survey respondents reported AI-related revenue increases within each business function using AI. And looking ahead, more than two-thirds expect their organisations to increase their AI investment over the next three years. 

Business benefits of AI and the expected take up are unsurprisingly leading to very bullish forecasts for the overall gen AI market. A report by Bloomberg Intelligence says gen AI is poised to explode and estimates it will grow to $US1.3 trillion by 2032 from a market size of just $US40 billion in 2022. That’s a compound annual growth rate of 42%. Some other forecasts are even more bullish. 

Robotics – which can go hand-in-hand with AI – are also likely to experience strong growth. Precedence research forecasts the market will grow from $US72 billion in 2022 to $US283 billion by 2032, which is a compound annual growth rate of almost 15%. 

Artificial intelligence and robotics ETFs

• The Global X ROBO Global Robotics & Automation ETF (ASX: ROBO)
• Betashares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ) 

Uranium 

Nuclear energy has long been a controversial power option following incidents including the Chernobyl disaster in 1986 and the Fukushima disaster in 2011. In the past couple of years, however, there has been a notable shift in public and political attitudes to nuclear power around the world. While it still has many opponents, nuclear energy is seen by some policymakers as an important element in meeting a nation’s carbon emission reduction targets. 

At the 2023 United Nations Climate Change Conference, 22 countries including the United States, Canada, UK and Japan signed a declaration to triple nuclear energy capacity globally by 2050. The declaration also invited international financial institutions such as the World Bank to encourage the inclusion of nuclear energy in lending policies. 

The price of uranium has rallied from around $US25 per pound at the start of 2020 to as high as $US106 in January of this year. At the time of writing, it’s sitting at about $US88. Analysts at Citi expect the uranium price to average $US110 a pound in 2025, while stockbroker Shaw and Partners expects it to hit $US150 in 2025, noting that under-investment following the Fukushima disaster has resulted in constrained supply.

Uranium explorers and producers are the obvious benefactors of this trend. Uranium stocks have risen sharply over the past 12 months, so investors should consider the extent to which higher uranium prices are already factored into the share price. There is also the risk of cost blowouts on uranium projects in the current high-inflation environment. 

Uranium ETFs

• Betashares Global Uranium ETF (ASX: URNM)
• Global X Uranium ETF (ASX: ATOM)

Ageing population 

The global population is ageing, thanks to declining birth rates and increased life expectancy. The World Health Organization (WHO) estimates that by 2030, one in six people in the world will be aged 60 or over. By 2030 the number of people aged 60 and over will increase from 1 billion in 2020 to 1.4 billion, according to WHO. By 2050, the world’s population of people aged 60 and older will double to 2.1 billion. And the number of people aged 80 or older is expected to triple between 2020 and 2050 to reach 426 million. 

This demographic trend creates huge opportunities for innovation in medicine and surgical instruments that extend and enhance the lives of older people as well as an overall stronger demand for healthcare. 

Investors can benefit from this trend by investing in healthcare ETFs or ETFs which specifically tap into the ageing population trend, although they may have to look to the US market for ageing ETFs. 

Healthcare ETFs

• iShares Global Healthcare ETF (ASX: IXJ)
• Betashares Global Healthcare ETF – Currency Hedged (ASX: DRUG)

Ageing population ETFs 

(These ETFs are listed in the US) 

• iShares Ageing Population UCITS ETF (AGED) 
• Global X Aging Population ETF (AGNG)