We recently published a list of 10 Worst-Performing Industries in 2024. In this article, we are going to take a look at where EV/Future Transportation industry stands against other worst-performing industries in 2024.
Several market-influencing factors are at play in 2024. These include policy easing by central banks around the world, falling commodity prices and multiple tech subindustries exiting the 2020-22 hype mania.
Other factors include the consistently growing investor/consumer focus on sustainability, slowing economic growth in China and a volatile geopolitical environment in Europe and the Middle East. These factors have put several industries on a path to recovery, while others on a long-term decline, yet others still in uncharted waters.
The fed cut rates in September by 50 basis points, which was welcomed by Wall Street as a positive signal towards a much anticipated soft landing. Following the cut, the broad market jumped 1.7%, on average, in one of its best days in the year, surpassing its last all-time high in July.
Some analysts, like Rob Rowe, expect the Fed to cut rates by at-least 25 basis points at each meeting through the rest of the year, further boosting investor confidence. The policy easing is expected to boost industries struggling due to a challenging borrowing environment.
However, some industries are likely to keep struggling due to their dependence on commodity markets. These industries are likely to suffer from overcapacity and weak demand. Commodity prices are sensitive to growth in China, whose economy grew 5.2% in 2023. Adjusted for low activity in 2022 due to lockdowns in the country, the 2023 growth was actually slow, and it is expected to slow further to 4.8% in 2024 and 4.5% in 2025, based on IMF forecasts.
On the other hand, industries that have a negative impact on the environment are on a long-term decline in their core business. This is leading to growing investments by the companies in these industries in recycling, carbon-capture technologies and renewable energy.
Best-Performing Industries in 2024
A challenging borrowing environment hasn’t stopped some industries from posting high gains in 2024. Two of the prominent ones include Semiconductors and Precious Metals. Based on the ETFs exposed to the industries, they’ve gained 45% and 37% YTD, respectively.
The demand for semiconductors is mostly driven by growth in AI, which, unlike many tech subindustries, is the only one that survived the 2020-22 hype mania. The industry posted trailing-12 month gains of 54%, based on a Roundhill Investments ETF we tracked exposed to companies at the bleeding edge of AI research in both hardware and software.
On the other hand, precious metals have outperformed the broader market so far owing to fiscal instability, geopolitical volatility and de-dollarization, even as the luxury market suffers onslaught.
Also Read Top 20 Fastest-Growing Industries in the World in the Next 5 Years and 16 Most Profitable Industries in the US in 2024.
Methodology
For our list of the worst-performing industries in 2024, we ranked them on the basis of YTD returns of ETFs and in some cases, of stock indices exposed to the respective industries, as of October 25.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
LifetimeStock/Shutterstock.com
EVs/Future Transportation
iShares Self-Driving EV and Tech ETF: -14.6%
As we noted earlier, the EV/Future Transportation industry has been facing strong headwinds, with the growth slowing down year over year. The Self-Driving EV and Tech ETF is down 14.6% year-to-date.
Fast Markets projects that the EV industry will grow 23% in 2024, which according to them, is a decline of 13% from the year prior. The year 2023-2024 saw scaling back of production projections by several major automakers like GM and Ford.
The period between 2020 and 2022 saw a lot of hype for various technologies, driven primarily by low interest rates, pandemic-driven cultural shift towards digitialization, and major developments in AI, blockchain and 5G technologies. The EV industry was no exception to accelerated tech adoption and hype.
The industry still expects the future of automobiles to be electric, albeit the growth to that future would be slower than anticipated in the previous years. There are several reasons for the hype die-down, with the first and foremost being the lack of adequate fast-charging infrastructure, capital cost issues due to lower EV resale values, and competition from Hybrids and Plug-In Hybrids.
However, oversupply issues in the battery industry could likely prove to be a tailwind for the EV industry, resulting in lower production costs and higher sales volume. As of now, batteries are 25-35% of the cost in EV manufacturing, with a typical EV costing nearly 33% more than an ICE vehicle in the US and EU. The time horizon for EVs becoming as affordable as ICE vehicles due to battery oversupply alone is around the end of the decade according to research by International Council for Clean Transportation.
As far as self-driving technologies go, they too were the beneficiary of the techno-optimism of the 2020-22 we talked about and they’ve been among the victims of the hype die-down as well. A report by F-Prime Capital showed capital pouring into the autonomous-driving industry declined by close to 60% in 2022. The same year saw Argo AI, a prominent autonomous-driving company disbanded due to a Q3, 2022 net loss of nearly a billion dollars.
However, Ford established a new division, called Latitude AI, for the same purpose and redirected Argo AI resources to the newly found division. This, of course, does not mean the industry is failing, just normalizing, with major players like Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA), among others, continuing to advance the industry. The primary challenge with full-scale self-driving is hundreds of millions of road scenarios, with a long tail of extreme edge cases with high stakes that demand extreme model accuracy for autonomous driving to be truly viable. This is asking for a lot of data and a lot of computing power. TSLA already scraps data from its cars on the road, but in principle, it’s challenging to find useful edge cases needed to improve model performance from all the hundreds of thousands of hours of driving data.
Overall, EV/Future Transportation industry ranks 2nd on our list of worst-performing industries in 2024. While we acknowledge the potential of EV/Future Transportation as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
