The universe of megatrends is vast, and we can confidently say that throughout 2023 and so far this year, it has been dominated by one theme in particular. That is artificial intelligence (AI), which has grabbed headlines and largely been behind the great rally in equities indices over the past year and into the first quarter of 2024.
In the world of megatrends, we see how a major part of the market tends to focus on those that are on everyone’s lips and that, therefore, stand out in terms of performance and momentum with respect to the others. As a result, other themes that may be on the decline but still have a lot of potential are forgotten. This explains the divergence in performance between the different themes over time.
Generally speaking, we can say that themes are subject to different cycles depending on how society perceives their impact at different points in time, as it is often not an easy task to gauge innovation that can change the world.
At first glance, thematic investing might seem easy, as it is a long-term investment in which the key is to wait for the megatrend to develop once the theme has been identified, but this is not always the case. The important thing and the success of the investment lies in holding positions in those companies with operations that fall mainly within the chosen theme, giving us a clear picture of both the growth drivers and the risks.
As we mentioned, the universe of megatrends is extremely broad and it ranges from very generalist and macro-related matters (such as the awakening of Eastern references like Japan or India, or the reactivation of M&A and public offerings), to others concerning sustainability, such as decarbonisation, a theme which, despite having experienced constant outflows, currently seems cheap relative to its potential growth. Europe has numerous companies working on green economy and sustainability matters, with great upside potential.
But perhaps the themes that are of most interest and capture the greatest market attention are those related to the micro, as has been the case with artificial intelligence, an emerging technology that makes it possible to increase productivity in the economy as a whole. While the boom seen in 2023 has been impressive and indeed propelled indices to all-time highs, AI is in its very early stages and there is still a lot of value to be captured.
By way of example, we have seen how AI has become increasingly important in the development of pharmaceuticals, and it is to be expected that market interest will move towards smart chemotherapy and the adoption of artificial intelligence in healthcare. This in turn has major implications in the area of longevity, assessing the effects on demographics, consumer habits or the healthcare system, among others.
Thematic flows have been stabilising over the last year with steady growth around the energy transition, mobility and digital innovation, which leads us to emphasise the importance of focusing on the full universe of megatrends, beyond the headlines and all that artificial intelligence encompasses.
Published in Estrategias de Inversión, 18.04.24