The year is coming to a close, and many disruptive themes had a stellar year from an investment standpoint — some well-known and others under the radar. Here are a few of the top disruptive technology themes of 2023.
1. Crypto/Blockchain
Crypto-related and blockchain ETFs were among the year’s best performers as bitcoin surged above the $43,000 level, up 160% for the year. One of the price drivers is speculation that we will see approval of a spot Bitcoin ETF early in 2024. Another catalyst for bitcoin’s gain has been the upcoming halving expected to occur in April 2024 when the number of blocks hits 740,000. This has spurred a frenzy in bitcoin mining that has helped drive up the price. Geopolitical instability is another factor, as bitcoin is a safe haven asset, much like gold.
Among the top ETF performers were the Valkyrie Bitcoin Miners ETF (WGMI) and the VanEck Digital Transformation ETF (DAPP), both up 200%, with the Invesco Alerian Galaxy Crypto Economy ETF (SATO) a close third with a 196% YTD gain.
Top performers in the category of Blockchain included the Global X Blockchain ETF (BKCH), which is up 190%. The Global X Blockchain and Bitcoin Strategy (BITS), which offers a hybrid approach, advanced 182%, and the Bitwise Crypto Industry Innovators ETF (BITQ) gained 180%.
Those are some big performance winners that exceed the returns of bitcoin alone!
2. Web 3.0
Another subtheme of crypto and blockchain, Web 3.0 ETFs, also delivered strong returns in 2023. What exactly is Web 3.0? It describes the next evolution of the World Wide Web, which is decentralized on the blockchain. Transactions on Web 3.0 are funded with cryptocurrency, and Web 3.0 integrates new technologies such as AI, tokenization, and the metaverse.
Two ETFs targeting the Web 3.0 theme are the Bitwise Web3 ETF (BWEB), up 75% YTD, and the SoFi Web 3 ETF (TWEB), which gained 66%.
3. Semiconductors
Semiconductor stocks are a key beneficiary of the rise in chip demand associated with bitcoin mining and artificial intelligence. The VanEck Semiconductor ETF (SMH) is up 55% for the year. The iShares Semiconductor ETF (SOXX) and the Invesco PHLX Semiconductor ETF (SOXQ) are both up 46%, and the First Trust Nasdaq Semiconductor ETF (FTXL) gained 35%.
4. Artificial Intelligence
Artificial intelligence-themed ETFs are Next in the queue of 2023 thematic winners. 2023 was the year of Open AI’s ChatGPT (launched in November 2022). This opened investor eyes to the unlimited potential. Technological risks associated with AI technologies such as natural language processing and machine learning.
2023 was the year that AI emerged on our smartphones and other consumer devices. College students and businesses are starting to use AI scaffolds to write research papers and emails. Many companies, including Canva, Apple, and Adobe, have implemented AI tools across their creative suites. Microsoft launched Copilot, an AI assistant integrating with Office and internet search. And Google has developed its own AI app called Bard.
While many broader-based technology funds provide exposure to the tech companies involved in artificial technology applications, some pure-play ETFs on the theme exhibited strong results in 2023. At the top of the heap was the actively managed TrueShares Technology AI & Deep Learning ETF (LRNZ), which is up 52%, followed by the ROBO Global Artificial Intelligence ETF (THNQ) and the Global X Artificial Intelligence ETF (AIQ), which both gained 46% YTD. The WidsomTree AI and Innovation ETF (WTAI) delivered a 33% YTD return.
A few hybrid AI/Robotics ETFs were also solid performers with exposure to this theme. The iShares Robotics and Artificial Intelligence Multisector ETF (IRBO) is up 29%, and the Global X Robotics and Artificial Intelligence ETF (BOTZ) is up 28%. The one ETF focused on generative AI, the Roundhill Generative AI and Tech ETF (CHAT), was only launched in mid-May, but since its inception, it has been up 13%.
5. Uranium
Rounding out the top 5 themes of the year are uranium ETFs, which might be an under-the-radar surprise. There are currently only 2 ETFs focused solely on uranium production and materials. The Sprott Uranium Miners ETF (URNM) was up 52% YTD. Sprott also has a physical uranium ETF in Canada with more than $5 billion in assets. That's up 68% this year.
The other uranium mining stock ETF in the category, the Global X Uranium ETF (URA), is up 42% YTD. If we broaden the opportunity set a bit to include nuclear power ETFs, the VanEck Uranium and Nuclear Energy ETF (NLR) is another top-performing contender, up 33% so far in 2023.
What are the underpinnings of uranium’s outperformance this year? Nuclear energy is gaining popularity again as a source of clean energy to generate electricity. France just approved a $56 billion plan to fund six new reactors. And Finland put a reactor into production this year. Even Japan, which swore off nuclear power after the 2011 Fukushima disaster, approved a plan to extend the life of its reactors. This allows for the building of new reactors. The uranium and nuclear power rise demonstrates how not all disruptive themes relate to tech.
What will be the top disruptive themes for 2024? Tune in next week for my prognostications.
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Read more on ETFTrends.com.The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
