By Ambrose O’Callaghan
The Republicans are now set to control policy initiatives for at least the next two years. What does that mean for Big Tech and the cryptocurrency and blockchain space? Today, we’re going to explore why forthcoming GOP policies could be a massive tailwind for the artificial intelligence (AI) space, and for big tech at large. Moreover, we’ll look at some of the ways the blockchain ecosystem has evolved over the course of this decade, and where it is headed after the Republican win. Fortunately, Harvest has three ETFs that are positioned to capture the tailwinds in these sectors.
Let’s jump in.
GOP victory: Why its a tailwind for AI and big tech
Joe Biden’s 2023 Executive Order (EO) on AI stipulated that organizations must exercise safety, accountability, and oversight of AI systems in their research and implementation. The Republicans aim to accelerate the pace of AI innovation.
The 2024 Republican platform has reiterated this stance. “We will repeal Joe Biden’s dangerous Executive Order that hinders AI innovation and imposes radical leftwing ideas on the development of this technology,” the platform states. “In its place, Republicans support AI development rooted in free speech and human flourishing.” Last year, Bloomberg Research released a report that estimated generative AI would become a US$1.3 trillion market by 2032. That is compared to a market size of just US$40 billion in 2022. This would represent a compound annual growth rate (CAGR) of 42% over the course of the decade. Generative AI market growth is propelled by training infrastructure in the near term and the shift to inference devices for large language models (LLMs), digital ads, specialized software, and services in the medium to long term.
HTA & HTAE | An award winner and an enhanced tech ETF
The Harvest Tech Achievers Growth & Income ETF (HTA:TSX) is poised to capture the benefits of further development in AI. The ETF offers access to the most dominant players in the technology space. These include companies that are positioned to win big due to the rise of generative AI, including NVIDIA, Microsoft, Apple, Meta Platforms, and Amazon.
On November 7, 2024, the HTA ETF classes, B and U, (HTA.B and HTA.U) won the 2024 LSEG Lipper Award. The LSEG Lipper Awards celebrate funds and fund management firms that excel in delivering strong, risk-adjusted performance relative to their peers. HTA.U has now won this award for three consecutive years.
HTAE received the Fundata FundGrade A rating on October 31, 2024. FundGrade was developed to recognize Fund Managers who have achieved superior risk adjusted returns.
Annualized Performance (%)
As at November 30, 2024
| Ticker | 1M | 3M | 6M | YTD | 1Y | 2Y | 3Y | 4Y | 5Y | 7Y | 8Y | SI |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| HTA | 4.15 | 6.38 | 13.51 | 25.90 | 31.35 | 33.45 | 9.95 | 18.08 | 20.13 | 17.90 | 19.59 | 16.21 |
| HTA.B | 4.77 | 10.74 | 17.20 | 33.88 | 36.49 | 37.15 | 14.49 | 21.29 | - | - | - | 24.05 |
| HTA.U | 4.19 | 6.58 | 14.08 | 26.70 | 32.28 | 34.44 | 11.05 | 19.04 | 21.51 | 19.13 | - | 19.84 |
Source: Harvest Portfolios Group, Inc.
For investors who want even higher levels of income and growth potential, there is the Harvest Tech Achievers Enhanced Growth & Income ETF (HTAE:TSX). This ETF offers exposure to the underlying holdings in HTA and applies modest leverage at approximately 25% for enhanced income and growth potential.
HTA and HTAE offer exposure to the explosive growth of AI and big tech. However, this is not the only sector that is garnering attention after the Republican election win.
Where Bitcoin and blockchain stand in November 2024
There are multiple factors that have spurred the recent price action in the cryptocurrencies and blockchain space.
The United States Federal Reserve moved forward with its monetary easing with two rates cuts of 50 basis points and 25 basis points, respectively, since the middle of September 2024. As a result, investors have shifted their asset allocation to take higher risks, leading to higher investment flows into the crypto space, primarily via Bitcoin ETFs. These have seen more than $9 billion of inflows over the past month.
Mid September also saw the launch of the T-Rex 2X Long MSTR Daily Target ETF – or MSTU ETF. This ETF provides 2x the exposure to the daily price movement in Microstrategy stock (MSTR US). This huge interest spurred higher demand for MSTR stock, which is up over 150% since the middle of September. MSTR announced an issued of over $21 billion in stock on October 30th. Moreover, it bought roughly 28,000 in Bitcoin using the proceeds.
Finally, there is reflexivity. Nothing changes sentiment like higher prices, and this has led to greater flows across the ecosystem. Bitcoin, Bitcoin ETFs, MSTU ETF, MSTR stock. This has created a reflexive cycle that is pushing the prices of each of the components higher.
Recent price action for HBLK
The Blockchain Technologies ETF (HBLK:TSX) is comprised of a portfolio of large cap companies that are engaged in implementation of (IBM, Accenture), or utilization (Mastercard, VISA) of blockchain technology. It also includes dedicated blockchain companies that are engaged exclusively in the blockchain ecosystem (Coinbase, Block, MARA Holdings, Riot Platforms, Core Scientific, Galaxy Digital, etc.). Due to the recent upwards price action in Bitcoin, we have seen it flow to the crypto miners, and crypto wallet and trading companies within HBLK.
Annualized Performance (%)
As at November 30, 2024
| Ticker | 1M | 3M | 6M | YTD | 1Y | 2Y | 3Y | 4Y | 5Y | SI |
|---|---|---|---|---|---|---|---|---|---|---|
| HBLK | 27.62 | 39.19 | 43.27 | 37.87 | 76.65 | 48.25 | (8.00) | 11.40 | 27.29 | 11.56 |
Source: Harvest Portfolios Group, Inc.
Another effect on the portfolio going forward would be the increase in the number of holdings the dedicated blockchain space at the next reconstitution. As per the design of this portfolio, if we cross a threshold for the number of holdings within the dedicated blockchain space, the weighting within the space would increase. That offers a higher exposure to the dedicated Blockchain companies within the portfolio.
Disclaimer:
Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). Please read the relevant prospectus before investing.
The indicated rates of return are the historical annual compounded total returns (except for figures of one year or less, which are simple total returns) including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. The funds are not guaranteed, their values change frequently, and past performance may not be repeated.
