Here’s where BlackRock sees a top thematic ETF investing opportunity as tech soars

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Electric vehicles and semiconductors are hot areas for exchange-traded funds based on returns so far this year, as technology-related stocks soar in 2023.

EVs, which have been a tailwind for the semiconductor industry, represent one of the best investment themes among BlackRock’s thematic ETFs, according to Jay Jacobs, the firm’s U.S. head of thematics and active equity ETFs. BlackRock’s iShares Self-Driving EV & Tech ETF
IDRV,
+1.85%
has climbed 10.3% so far this year through Wednesday, compared with an 8.6% gain for the SPDR S&P 500 ETF Trust
SPY,
+0.80%,
according to FactSet data. 

“Innovation can happen slowly and then all at once,” said Jacobs, in a phone interview. “Over the last five years or so, we’ve just seen an incredible acceleration of electric-vehicle adoption.”

While the EV industry has taken off, it still has a long way to go considering electric vehicles represent just 7% of total car sales in the U.S. — even after rapid sales growth over the past year, according to Jacobs. 

“When we look at thematic investing opportunities, that’s exactly the inflection point that we are looking for,” he said, referring to the juncture where an innovative idea turns into something being adopted by the mass market. “That’s where the majority of the economic opportunity is going to materialize.”

Meanwhile, technology-related stocks have soared in 2023. The Technology Select Sector SPDR Fund
XLK,
+2.06%,
which tracks an index of S&P 500 tech stocks, has skyrocketed 24.1% this year through Wednesday, according to FactSet data.

The three largest electric-vehicle ETFs based on assets under management are the Global X Autonomous & Electric Vehicles ETF
DRIV,
+1.40%,
the iShares Self-Driving EV & Tech ETF and the KraneShares Electric Vehicles & Future Mobility Index ETF
KARS,
+1.40%,
according to Aniket Ullal, head of ETF data and analytics at CFRA Research.

The Global X Autonomous & Electric Vehicles ETF has gained 16.7% this year through Wednesday, while the KraneShares Electric Vehicles & Future Mobility Index ETF has risen slightly more than 5% over the same period, FactSet data show. 

The Global X Autonomous & Electric Vehicles ETF has “pretty big exposure to technology companies,” said Ullal, pointing to its holdings of Google parent Alphabet Inc.
GOOGL,
+1.12%
and Apple Inc.
AAPL,
+1.46%
as examples. The ETF’s top five holdings on May 17 included Nvidia Corp.
NVDA,
+1.39%,
Tesla Inc.
TSLA,
+1.95%,
Alphabet, Apple and Toyota Motor Corp.
7203,
+0.85%,
according to Global X’s website.

Meanwhile, the KraneShares Electric Vehicles & Future Mobility Index ETF’s largest holdings were Panasonic Holdings Corp
6752,
+1.45%,
Nidec Corp.
6594,
+2.37%,
Contemporary Amperex Technology
300750,
-0.04%,
BYD Co.
002594,
+0.97%
and Samsung
006400,
+0.68%
as of May 17, data on KraneShares’s website showed.

As for the iShares Self-Driving EV & Tech ETF, the fund’s five biggest weights on May 17 were Li Auto Inc.
2015,
-1.60%,
BYD
1211,
+1.75%,
ABB
ABBN,
+0.90%,
Allkem and Volkswagen
VOW3,
+2.55%,
according to the fund’s holdings data on BlackRock’s website.

BlackRock’s fund aims for a “pure play” strategy relating to electric and autonomous vehicles, Jacobs said. Meanwhile, he said, the iShares Semiconductor ETF
SOXX,
+3.12%
should continue to benefit from a tailwind from the proliferation of electric vehicles as well as from the growth in artificial intelligence in 2023.

The iShares Semiconductor ETF has skyrocketed 24% this year through Wednesday, according to FactSet data.

Semiconductor ETFs have seen “good flows” this year, broadly attracting about $1.9 billion of capital from investors through May 15, according to Ullal. By contrast, the “future mobility” category of ETFs, which includes electric-vehicle funds, have seen aggregate outflows of $97 million over the same period, he said.

As usual, here’s your look at the top- and bottom-performing ETFs over the past week through Wednesday, according to FactSet data.

The good…

…and the bad

New ETFs

• Roundhill Investments said Thursday that it launched the Roundhill Generative AI & Technology ETF
  CHAT,
  +1.94%,
  a fund that provides exposure to “companies at the forefront of artificial intelligence technology, with a focus on generative AI.” 

• Putnam Investments announced on Thursday the launch of the Putnam Emerging Markets ex-China ETF
  PEMX,
  +0.70%,
  an actively managed fund that focuses on emerging-market companies excluding investments in China and Hong Kong.

• BNY Mellon Investment Management announced May 17 the launch of BNY Mellon Women’s Opportunities ETF
  BKWO,
  +0.60%
  and BNY Mellon Innovators ETF
  BKIV,
  -0.04%.

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