Wealth Outlook 2024 - Slow then grow

84 Wealth Outlook 2024 | Unstoppable trends Total semiconductor market (US$bn) Total semiconductor YoY (%) AI market (US$bn) AI YoY (%) 800 60 600 40 400 20 200 0 0 €20 2019 2020 2021 2022 2023F 2024F 2025F 2026F 2027F AI-propelled digitization in 2024: five areas of focus FIGURE 1 For all the promise, when it comes to chipmaking capacity, AI has a lot of catching up to do Source: Citi Research, Gartner, as of November 17, 2023. All forecasts are expressions of opinion and are subject to changewithout notice and are not intended to be a guarantee of future events. Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. For illustrative purposes only. Past performance is no guarantee of future results. Real results may vary. 2. AI infrastructure (chipmakers, semiconductor equipment, data centers) As demand for AI grows exponentially, we expect key suppliers along the global semiconductor value chain to be big 2024 beneficiaries. Today, chips required for AI computing make up just a small fraction of overall semiconductor manufacturing ( FIGURE 1 ). But the rise of generative AI applications has seen demand shift from general-purpose computing to high-performance chips. Semiconductor equipment providers and fab facilities with the capacity and know-how to produce cutting- edge chips hold near-monopoly positions in their areas of expertise. Leading players in the US, Japan, Taiwan, South Korea and the Netherlands have dominated the market share for semiconductor fabrication, capital equipment and services that enable advanced chipmaking. For instance, one Dutch company is the sole provider of the lithography equipment needed to imprint silicon with the nanoparticle-sized circuitry. Taiwan’s largest fab facility is aiming to at least double its capacity for AI-related chipmaking processes in 2024. Alternatives to this equipment and manufacturing know-how are hard to come by (though under pressure fromWestern import restrictions, China is trying – see page 98 ) , and there are significant barriers for potential new entrants. As the semi cycle turns upward in 2024, we see an opportunity for semiconductor manufacturer and equipment shares to catch up to the GPU design firms that led the market last year.