Hear enough about how the novel coronavirus is affecting markets and you’re sure to hear something about supply chain disruption. In fact, hundreds of companies around the world have brought up that exact phrase on the recent earnings conference call.
With stocks sliding, it may hard to see the forest through the trees, but supply chain disruption is a theme that could eventually work in favor of ETFs such as the Global X Robotics & Artificial Intelligence Thematic ETF (NasdaqGM: BOTZ).
BOTZ seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
“Exogenous risks such as trade conflicts, geopolitical tensions and, now, the COVID-19 crisis have companies rethinking their supply chain strategies,” said Global X in a recent note. “Reshoring manufacturing to their home countries and diversifying supply chains are now priorities as firms look to maintain greater control and avoid costly interruptions.”
BOTZ seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Robotics & Artificial Intelligence Thematic Index. The index itself captures large and mid-cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries.
Banking on BOTZ
“The US-China trade conflict raised alarm bells about the fragility of global supply chains. Brexit and the United States-Mexico-Canada Agreement (USMCA) further damaged confidence in international trade agreements,” according to Global X. “And in addition to these policy-driven concerns, the COVID-19 crisis and its impact on Chinese factories highlighted the risks associated with concentrating manufacturing efforts within specific geographies.”
Robotics and artificial intelligence are making machines smarter and more capable than ever before, allowing robots to take on increasingly sophisticated tasks for faster and more accurate production. Declining computer chip costs and improving connectivity allows for virtually any object to connect to internet-enabled networks, effectively turning anything into a connected device.
“As companies consider the tradeoffs between onshore and offshore manufacturing, robotics and artificial intelligence are likely to be the x-factors that tip the scales in favor of onshoring,” notes Global X. “Automation allows companies to offset some of the costs of reshoring by enlisting robots to complete certain tasks rather than human workers. Robots work tirelessly across shifts and can complete certain tasks faster and more accurately than humans, while not requiring raises or benefits.”
For more on thematic ETFs, please visit our Thematic Investing Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.