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Why The IoT ETF Matters

ETF Professor

Some thematic exchange traded funds go overlooked despite offering investors exposure to compelling, fast-growing market niches.

Such is life for the Global X Internet of Things ETF (NASDAQ: SNSR), but amid broader adoption of the Internet of Things (IoT), SNSR is poised to shed its overlooked status.

What Happened

The move to 5G networks and the expected increased connectivity of billions of devices around the world are among the catalysts expected to boost IoT-related companies in the years ahead.

“The IoT is a critical enabler and enhancer of several emerging technologies that are expected to have disruptive impacts felt across the global economy,” said Global X in a recent note.

SNSR, the only dedicated IoT ETF in the U.S., tracks the Indxx Global Internet of Things Thematic Index. The fund is up 12.05 percent this year.

Why It's Important

IoT is at the intersection of a slew of emerging technologies, including artificial intelligence (AI) and robotics, big data, cloud computing and more.

“Predictive maintenance and analytics have already gained significant traction in manufacturing and telecommunications by using sensors to collect data that can then be analyzed by algorithms,” said Global X. “Experts expect that by 2022, more than 80% of enterprise IoT initiatives will include an AI component, up from only 10% in 2017.”

Cloud computing software-as-a-service (SaaS) is potentially fertile ground for SNSR member firms as well.

“The shift to software-as-a-service business models is expected to support IoT growth, as service providers seek to move up the value chain and offer other services such as security or data governance, and AI and analytics.” according to Global X.

SNSR holds 50 stocks, over 30 percent of which are semiconductor names. The average market value of the fund's holdings is $25.81 billion.

What's Next

SNSR also allocates just over 8 percent of its weight to consumer electronics manufacturers, a relevant weighting because smart home and related technologies are big markets for IoT applications.

“Estimates suggest the smart home market grew by 31% in 2018, with sales of nearly 644 million smart home devices,” said Global X. “As many as 1.3 billion smart home devices are expected to be sold in 2022 for a compound annual growth rate (CAGR) of more than 20%.”

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