Equity themes for the next decade

According to the World Economic Forum’s Top 10 Emerging Technologies of 2024 report, it’s perhaps no surprise that the speedy acceleration of artificial intelligence (AI) – and what it means for scientific research – topped the list of major tech developments¹.

While scientists have long been experimenting with how AI can advance their knowledge and capabilities, recent breakthroughs in deep learning, generative AI and foundation models are changing the game when it comes to rates of discovery and prediction.

The WEF’s report explains how ‘AI for Scientific Discovery’ is transforming how new knowledge is discovered and used: AI systems such as Deep Mind’s AlphaFold, for instance, can accurately predict the 3D models of protein structures¹. Indeed, AI has also been applied in research that discovered a new family of antibiotics and created materials for more efficient batteries¹.

However, it’s important to put some of the AI hype into perspective. Karen Kharmandarian, CIO at Paris-based equities investor Thematics AM, commented: “Amara’s law cautions that we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. While the long-term opportunities related to AI are significant and far reaching, there are always risks that the hype associated with the underlying technologies subsides before those same technologies are widely adopted.”

And while AI has been the driving force behind the majority of returns for large-cap global indices for most of 2024, there are other long-term themes that have not received as much attention from investors, so they are trading at lower valuations and could hold just as much investment potential over the next ten years.

For Jens Peers, CIO and portfolio manager at sustainable investing specialist Mirova US, exciting areas to pay close attention to include global supply chains and water sanitation, as well as opportunities for advancements in obesity drugs and cancer treatments as part of wider innovations in the healthcare sector.

Research by Morgan Stanley finds obesity has a 2.4% drag effect on GDP and is associated with more than 200 health complications, contributing to a five-fold US health spend increase since 1970². With search interest in obesity medications up 100% year-on-year, their base case is a $105 billion market by 2030².

“We have already seen big opportunities related to obesity in the last couple of years, and we think that is going to continue,” said Jens. “However, we also see more and more positive evolutions with drugs getting through phase II and phase III in oncology, the battle against cancer, and we expect that to be a big driver of future returns for the pharmaceutical industry.”

Whether it’s distinguishing the hype from the high performance around AI, or tracking the trajectory of innovations across supply chains, healthcare and water, there are plenty of equity themes for investors to keep an eye on over the next ten years.