The Next Big Theme: January 2023

Metaverse & Video Games

Virtual Reality Immerses Itself in 2023

Meta Platforms will allocate an estimated 20% of its overall costs and expenses in 2023 to Reality Labs, its virtual reality (VR) and augmented reality (AR) and Metaverse business.¹ In Q3 2022, Meta allocated 18% of its spending to Reality Labs.² The increased investment reflects the company’s commitment to developing immersive technologies despite the economic downturn and market volatility that hit big tech particularly hard in 2022. This approach is in line with the rapid innovation seen in the VR and AR space at CES 2023. Many companies debuted exciting new products that push boundaries, including Sony PlayStation’s VR2 gaming headset, HTC’s Vive XR Elite headset, and Lumus’ Z-lens technology.

Artificial Intelligence & Cloud Computing

ChatGPT Enters the Cloud

Microsoft is looking to invest $10 billion into OpenAI, which would value the emerging leader in artificial intelligence at $29 billion.3 The deal includes a provision for Microsoft to acquire a 75% share of OpenAI’s profits until the investment is recouped, and ultimately, a 49% stake in the company.4 This move is seen as a strategic one for Microsoft, as the integration of OpenAI’s technology, particularly the natural language processing model ChatGPT, could enhance the company’s search engine capabilities and challenge the dominance of market leader Google. Additionally, Microsoft is expanding its partnership with OpenAI by making their Azure OpenAI Service available to the public, enabling Azure cloud customers to use OpenAI tools for cloud applications such as Dall-E AI art generation and the GPT-3.5 language system, and even plans to add access to ChatGPT in the near future.

Electric Vehicles

Government Pumps in Billions for a Cleaner America

The U.S. Department of Energy recently secured a significant $2.5 billion loan to Ultium to support the construction of large-scale electric vehicle (EV) lithium-ion battery cell manufacturing plants.5 This venture is a collaboration between General Motors and LG-Energy Solution and will involve the construction of state-of-the-art facilities in Ohio, Tennessee, and Michigan, with the possibility of a fourth site in Indiana. The Michigan facility alone is projected to open as early as 2024 and is a key step towards President Biden’s goal of achieving 50% of U.S. auto production to be electric or plug-in hybrid electric vehicles by 2030.6 The commitment to clean transportation extends to the state level, with the California Energy Commission approving a substantial $2.9 billion investment plan to expedite the state’s goals for electric vehicle charging by 2025.7 This funding will support the roll-out of thousands of zero-emission trucks, school buses, and transit buses, and is projected to result in the installation of 90,000 EV chargers across the state – significantly surpassing the current number of 80,000.8 Combined with additional funding from utility companies and other programs, these investments are expected to play a pivotal role in California reaching its goal of deploying 250,000 EV chargers by 2025.

Genomics & Aging Population

COVID-19 Victory: Moderna Takes on Cancer

Utilizing the same messenger RNA technology that made their COVID-19 vaccines successful, Moderna created an experimental cancer vaccine that shows promising results in the treatment of melanoma. In a mid-stage trial, the combination of Moderna’s personalized cancer vaccine and Merck & Co.’s highly effective immunotherapy Keytruda resulted in a 44% reduction in the risk of recurrence or death, compared to Keytruda alone.⁹

Eli Lilly’s 2023 Biopharma Breakthrough

Eli Lilly is poised for a transformative year as it sets out ambitious plans to submit regulatory applications for five innovative products, launch six phase three trials, and unveil data from six other phase 3 trials.¹⁰ These efforts along with diabetes treatment Mounjaro are expected to generate over $30 billion in sales in 2023.¹¹ Regulatory submissions in the U.S., Europe, and Japan include Empagliflozin for chronic kidney disease and donanemab for early Alzheimer’s disease. Lilly also plans to submit tirzepatide for obesity in the U.S. and Europe and lebrikizumab for atopic dermatitis in Japan, further solidifying its position as a leader in pharmaceutical innovation.

Solar Energy & Clean Technology

Solar Energy Achieves Record Conversion Efficiency

JinkoSolar, a leading solar module manufacturer, announced a significant development in its N-type monocrystalline silicon tunnel oxide passivated contact (TOPCon) solar cell technology. The company achieved a maximum solar conversion efficiency of 26.4%, surpassing its previous record of 26.1% set in October.¹² The company used advanced techniques such as bulk defect passivation technology, a novel structure polysilicon contact, and metal-silicon interface recombination restraint technology. Additionally, Canadian Solar announced that its majority-owned subsidiary, CSI Solar Co. Ltd., will begin mass-producing high-efficiency N-type TOPCon solar modules with a power output of up to 690 watts in Q1 2023.¹³

Internet of Things

Semiconductors in it For the Long Haul

The global market for semiconductor manufacturing equipment is on track to reach a new peak in 2022, with original equipment manufacturers forecasting sales of $108.5 billion, a 6% increase from the previous record of $102.5 billion set in 2021.¹⁴ This marks three consecutive years of record revenue for the industry. However, the market is expected to experience a temporary dip in 2023, contracting to $91.2 billion, before rebounding in 2024 due to strong demand in both front-end and back-end segments.¹⁵ Additionally, the semiconductor ecosystem is experiencing a surge in growth, as companies leverage funding from the CHIPS Act to drive innovation and production, resulting in over 40 new projects, nearly $200 billion in private investments across 16 states, and the creation of 40,000 new jobs in the industry.¹⁶

THE NUMBERS

The following charts examine returns and sales growth expectations by theme, based on their corresponding ETFs.

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The Next Big Theme: January 2023

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