ETF Express: Week Ending 17 November 2023

ETF Express is Global X’s weekly coverage of the latest ETF Market Moves, Thematic Spotlight and Commodity Calls.

 

  • Clean energy ETFs (ATOM, CLNE, HGEN, TANN, URNM) rallied last week after the latest US CPI release confirmed that inflation was cooling.1 Clean energy projects such as hydrogen and solar require long investment runways and are often heavily debt reliant – falling inflation indicates the Fed’s hiking cycle may be nearing its end and acquiring further capital will not become more expensive.
  • The US dollar (YANK) was the poorest performer of the week as markets priced-in a potential peak in US interest rates. Traders now expect a possible rate-cut as early as May 2024, according to the CME Fedwatch tool.2
  • There were $530.8 million in reported inflows for the week, and only $170 million in outflows, marking a week of strong net inflows for the Australian ETF industry.

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Microsoft Unveils AI Chip to Rival Nvidia

Artificial intelligence and Semiconductors

Microsoft’s new ‘Maia 100’ chip, will launch alongside a suite of software tools designed to allow Microsoft Azure clients to design and build their own AI assistants.3 The Maia 100, a powerful artificial intelligence and cloud-computing processor chip, could debut in Microsoft data centres as early as next year and eventually remove the need for external semiconductor providers.4

Microsoft’s foray toward in-house chip design is part of a trend of mega-cap tech institutions reducing their reliance on established firms such as Qualcomm, Intel, and Nvidia. Apple famously dropped Intel’s CPUs in 2020, opting instead to design the M1 chip in-house,5 and more recently, the company has also tried to lower their dependence on Qualcomm, having acquired Intel’s mobile phone division to build out its modem team.6 Amazon, which operates the world’s largest cloud service, quietly began developing its own AI chip named ‘Nitro’ in 2013.7 Today, ‘Nitro’ is critical to AWS operations, with each of Amazon’s 20 million servers housing at least one of the processors.8 Last but not least, Google, in a move to match AWS’ success, have also begun working with newly IPO’d ARM to develop its own custom server processors earlier this year.9

While big tech firms have mountains of resources to pour into R&D, the industry knowledge and technical prowess of existing semiconductor giants are proving a difficult hurdle. Apple’s attempts to shake off Qualcomm, for example, have been largely unsuccessful – a recent report showed their in-house modem designs were initially slated for release in 2024, however difficulties in development had pushed back that date by at least two years.10 On the AI front, Nvidia’s dominance looks to continue growing, with analysts expecting the company to report a whopping 171.7% YoY revenue growth in its earnings this week.11

Explore semiconductors with SEMI.

 

Uranium

Bullish

  • The world’s largest uranium miner by volume, KazAtomProm, has signed a long-term supply contact with China’s National Uranium Corporation.12 The contract will provide a steady supply for China’s growing nuclear power industry and secure a consistent source of demand for the mining giant.

Bearish

  • NuScale Power, a leading distributor of small modular reactors (SMRs), has terminated their “Carbon Free Power Project” (CFPP) in accordance with Utah Associated Municipal Power Systems.13 The cancellation of CFPP is a major blow to US’s clean energy efforts as the project was expected to be the US’s first ever SMR to receive licensing for construction.14

Explore uranium with ATOM.

Crude Oil

Bullish

  • OPEC+ members are set to consider extending crude oil production cuts deep into 2024 at their next meeting on November 26th.15
  • In another step to punish Moscow for its invasion of Ukraine, the US have imposed new sanctions on maritime companies and even individual vessels for shipping Russian oil being sold above the G7’s set price cap.16 The current price cap stands at US$60 per barrel.

Bearish

  • Crude prices fell last week as US inventories rose by 3.6 million barrels and industrial production fell by 0.6%.17 Slowing production combined with increased supply have some analysts concerned that demand is weakening.

Explore crude oil with BCOM.

Gold

Bullish

  • Gold prices may rise as the US dollar loses some of its lustre. The US dollar weakened last week after a surprising CPI beat which suggested the Fed’s fight with inflation may be nearing its end.18 Analysts now expect no further rate hikes, and a potential rate-cut by mid-2024, easing some of the price pressures on gold.19

Bearish

  • Precious metal’s appeal as a safe haven asset have decreased as concerns surrounding the escalation of global conflicts have subsided.

Explore physical gold with GOLD.

 

Forecasts are not guaranteed, and undue reliance should not be placed on them. This information is based on views held by Global X or referenced sources as at 21st November 2023.