2024 Thematic Outlook

Three key themes to get investors off the sidelines

KEY TAKEAWAYS
1 2
A higher bar Artificial intelligence (AI): From
A more volatile macroeconomic regime, concept to commercialization
alongside relatively high rates, may mean
The AI trade is just beginning, with enterprise
investors need to demand greater
compensation for taking on equity risk; they AI adoption, accelerated computing, and
can meet this higher performance bar by cutting-edge hardware set to take center
getting precise about targeted opportunities. stage in 2024.

3 4
A new era for medical innovation The rewiring of globalization
Attractive valuations, the potential for Heightened geopolitical fragmentation is
breakthroughs in neuroscience and AI-driven driving a doubling down on supply chain
healthcare could present an attractive entry reorientation that is creating geographic
point. winners and losers in emerging markets.

A higher bar
In today’s era of heightened market volatility and “short-termism,” long-term structural trends with near-term
catalysts could prove a defining edge in generating outperformance. Macroeconomic uncertainty has triggered
sentiment swings, resulting in rotations along factor, sector and country lines. Some sectors are being
discounted without proper recognition of firms leading innovation or driving structural change. The market's
underappreciation of nuance is exaggerated by tight liquidity, amplifying up and down market moves.
An uncertain backdrop does not mean a dearth of opportunity. We believe ongoing macro volatility could
translate into divergence in security performance. We saw a similar phenomenon in 2023 – that AI would
outperform broader technology.
There is $6 trillion sitting in cash on the sidelines given record high short-term rates.1 This has kept many
investors out of equities. However, we see pockets of the market – specific themes – where capturing divergence
could be rewarded relative to cash and other assets. Benefitting from this requires granularity and nimbleness.
Investors need to demand greater compensation for taking on equity risk; they can meet this higher bar by
getting precise about targeted opportunities.
We focus our 2024 outlook on: the growth of AI; medical innovations being overlooked given low current revenue;
and countries – such as Mexico and India – that could benefit from the rewiring of globalization.

iCRMH1123U/S-3228507-1/9 1
Artificial intelligence: From concept to commercialization
2023 was the year AI exploded onto the scene, but we believe AI adoption is just beginning. In the coming year,
enterprise AI adoption and product integration will leap forward; multi-modal AI will move closer to reality; and
hardware opportunities will grow to expand beyond graphics processing units (GPUs).
70% of executives will increase AI resourcing in 2024, with cost savings a major driver of adoption. 2 Examples
include analyzing legal briefs, automating repetitive tasks such as healthcare paperwork, and handling customer
service. In the medium-term, we foresee AI driving incremental revenues by being embedded into existing
products. There are already glimpses of this, like Microsoft Office 365 Copilot.

Cost savings is a major driver of corporate AI implementation strategies

Survey results: What is the biggest driver of corporate AI implementation strategies?

6%
5%

29%

60%

Cost savings New revenue streams Transformation No strategy

Source: Bank of America, “AI Evolution: Reality Justifies the Hype” 10/11/2023. Based on survey responses from 114 fundamental equity analysts.

We believe the vast majority of capital expenditures in 2024 will be dedicated to accelerated computing, the use
of specialized hardware that speeds up processing - often with parallel processing that bundles frequently
occurring tasks. Graphics processing units (GPUs) are the most widely used accelerators. Accelerated computing
is fast, cost effective and energy efficient. A single GPU node could outperform a 16-node central processing unit
(CPU) cluster by 33%, while slashing computing costs by 70%.3 GPUs also deliver 42 times the energy efficiency
for AI inference vs. CPUs.4
We are already seeing examples of multi-modal AI – generative AI that can operate in multiple dimensions such
as text, sound, video and more all at once – with users of ChatGPT able to not just communicate with the model
via text but also upload images and voice prompts. More modalities are coming, such as the ability to generate
high quality three-dimensional models from textual descriptions or even entire video games and films.
AI is even transforming investing. Jeff Shen, Co-CIO and Co-Head of Systematic Active Equity, shared: “Artificial
intelligence is both a potential space to allocate capital and a novel tool for investing. AI can be used across
unstructured textual data to extract investment insights or be deployed at the portfolio level to optimize signal
combinations for targeted investment outcomes. Looking ahead, we view the AI-empowered investor who blends
‘big’ data and ‘big’ models with human insight as the future of asset management.”
The next frontier for generative AI is inference, where AI models generate unique outputs based on new inputs.
Inference focuses on applying learned knowledge quickly and efficiently. It is the difference between learning
how to do new math problems in class (training) versus completing a worksheet of math problems that you can
work through yourself to solve (inference). While GPUs are instrumental in training AI models, they are not the
most efficient choice for inference. CPUs play the more critical role, as will application-specific integrated
circuits (ASICs). Networking hardware is also crucial for faster data transfer between servers running GenAI
models and devices, as are power management chips for energy efficiency. High performance solid-state drives
(SSDs) will also be increasingly important in the AI stack. As a result, we see performance widening out from a
primary focus on GPU makers, to a broader range of semiconductor and hardware firms. (Read more about
investing in semiconductors.)

iCRMH1123U/S-3228507-2/9 2
AI systems will increasingly rely on enterprise and personal data. Fortifying digital defenses has therefore
become increasingly important. Ironically, AI could be a potent tool in protecting itself. Machine learning
algorithms can analyze vast datasets to identify anomalies and potential security breaches in real-time. And AI-
driven threat detection can recognize malicious patterns that human analysts might miss.
2023 saw the market crown mega-cap tech as the “AI winners”, with the “Magnificent Seven” returning an
average of 81% year-to-date (YTD).5 This is far beyond the NYSE FactSet Global Robotics and AI Index up 13%
YTD.6 This may leave room to run for investors looking to capture enterprise and product adoption, multi-modal
advancements and expanded hardware opportunities. We believe that small and mid-cap companies could be
sought out in the new year as investors look for AI plays that appear to have attractive valuations. And those
current valuations remain reasonable, with the NYSE FactSet Global Robotics and AI Index trading at a price-to-
earnings (P/E) of 19.7, less than the S&P 500 Information Technology Index multiple of 29.0. 7 A price-to-
earnings ratio is a valuation metric that measures the relationship between a company’s stock price and
earnings per share (EPS). In other words, many of the artificial intelligence stocks beyond the few already
anointed “magnificent” are undervalued relative to mega caps and the broader technology sector.
Read more about the AI investment opportunity and its macroeconomic implications.

A new era for medical innovation

Recent breakthroughs in treatments for Alzheimer's, coupled with AI-driven healthcare and medical tech
advancements, could be poised to revolutionize medicine. Investors could be missing out on neuroscience and
biotech opportunities by overemphasizing current revenue and ignoring the one-two punch of innovation
alongside compelling valuations.
US demographics are at an inflection point as we hit “peak 65” - the largest number of people ever reaching
traditional retirement age8 – and the “Historical Reversal” - wherein the proportion of Americans aged 65 and
older exceeds children under 15 for the first time.9

The greatest surge of new retirees in the nation’s history is fast approaching
Proportion of Americans aged 65+ vs. those aged 15 during 1924 and 2024 U.S.
presidential elections
31%

19% 18%

5%

1924 U.S. presidential election 2024E U.S. presidential election

Americans aged 65 years and older Children under age 15 years

Source: The Hill, “2024: The Historic Reversal of America’s population,” 05/20/21.

As the 65-plus aged population grows, so too will the number of Americans experiencing age-related diseases:
longer, healthier lives are an amazing win for society but also bring greater prevalence of age-related diseases,
such as dementia and cancers. At the same time, progress in the battle against obesity will likely lead to longer
lives still.
In 2023, one in nine older Americans faces Alzheimer’s and this number is set to double.10 Lecanemab, fully
approved in July 2023, is the first medication to slow Alzheimer’s.11 Meanwhile, donanemab, another Alzheimer's
drug, has shown remarkable progress in Phase 3 trials by driving 60% reduction in early-stage Alzheimer's
progression.12 With analysts anticipating huge sales of both drugs, more treatments are being accelerated and
entering trials in order to reach the market as soon as 2024. (Read more about investing in neuroscience.)

iCRMH1123U/S-3228507-3/9 3
Advancements in obesity treatments are also underway. Dr. Erin Xie, head of the Health Sciences team in
BlackRock's Active Equity Group, shared that in treating obesity "decades of genomics research are now paying
off, leading to a deeper understanding of the root causes of diseases as well as a new wave of medicine.” New
therapies that promote weight loss could add over $100 billion of revenue to the $1.5 trillion prescription drug
market, according to our analysis.13
Neuroscience, genomics and broader biotech are set to be big winners in adopting AI. AI models will sift through
enormous volumes of health data - such as clinical studies, brain mapping and genetic information - and
analyze it much faster than humans. The AI healthcare market, worth $9 billion in 2022, is forecasted to
skyrocket to $188 billion in 2031.14
1. Brain and gene mapping: Scientists just used AI to map a fruit fly’s brain with 150,000 neurons, the first
complete brain map ever created for any adult animal.15 AI is accelerating neural pathway tracing processes
by 50 to 100 times.16 Scientists are finally able to map the 200 billion cells and 86 billion branching neurons
in the human brain, creating detailed cell atlases.17 And we are rapidly improving understanding of a wide
range of neurodegenerative, neurotraumatic neuropsychiatric conditions in ways that will lead to far better
diagnosis and treatment.
2. Drug Discovery: Bringing a new drug to market, factoring in failures, currently costs about $2.5 billion.18 The
process takes 12 to 15 years on average, with a 35% likelihood of discovering a new drug and a 9% to 14%
success rate for regulatory approval post Phase 1 trials.19 By 2025, over 30% of new drugs are expected to be
discovered using generative AI techniques, potentially saving biotech companies 25% to 50% in time and
costs from discovery to preclinical stages.20

Applications of AI in healthcare
Rare Disease
Diagnostics & Treatment

Drug Development Virtual Nursing Assistance

Medical Diagnosis Fraud Detection

Dosage Error Reduction Cybersecurity

Cancer Research Gene Editing

Personalized Healthcare Plans AI Robot-Assisted Surgery

Health Monitoring & Wearables

Source: World Economic Forum, “Scaling Smart Solutions with AI in Health: Unlocking Impact on High-Potential Use Cases,” June 2023. Research and definitions summarized by BlackRock.
For Illustrative Purposes Only.

Healthcare stocks, especially those tied to medical innovation, suffered in 2023 due to a restrictive capital
environment. This could present an appealing entry point for investors focused on breakthrough themes with low
valuations.

iCRMH1123U/S-3228507-4/9 4
 The rewiring of globalization
In 2016, BlackRock identified the trends transforming the world – they spanned technology, demographics,
climate and urbanization. In 2023, we formally added another that we have been closely monitoring and seeing
build for some time: geopolitical fragmentation and economic competition.
Simply put, globalization – a foundational driver of markets for almost 80 years – is shifting meaningfully:

History’s next chapter may not be as global as the last

History of globalization, 1870-2020
70

60
Interwar
Trade Openness Index

50 1914-1945

40

30

20
Plateau & Uncertainty
10
2015-2020+
0
1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Source: BlackRock Investment Institute and U.S. Bureau of Economic Analysis, with data from Haver Analytics, November 2022. The chart represents globalization as the sum of world exports
plus imports, divided by world GDP.

One consequence of trade rewiring is production moving to higher cost locales – not just to the U.S., Western
Europe and Japan, but also “near” or “friendly” countries where costs are lower than developed markets but still
higher than much of Asia. Linus Franngard, Senior Portfolio Manager in BSYS, noted that “pressure to prove
reliability is leading U.S. companies to reevaluate global sourcing and customer access, particularly in critical
areas like technology. While reshoring or nearshoring plans may be enacted over several years, stock price
shocks will be felt far sooner.”
Mexico is the paradigmatic example of near-shoring and friend-shoring: it shares a border with the U.S. and its
lower cost of labor and skilled workforce make it attractive for firms bringing manufacturing closer to home.
Mexico also benefits from the United States–Mexico–Canada Agreement (USMCA), a free-trade agreement that
eliminates tariffs across North America. Counterintuitively, given that the movement of jobs to Mexico is a recent
and accelerating phenomenon, Mexican equities are valued below historical averages over 1-year and 3-year
periods and trading at a discount compared to broader emerging markets.21

Diversifying supply chains and deepening ties with partners, like Mexico
Survey results: Why is Mexico attractive as an investment destination?

Qualified Labor Force

Salaries

Proximity to U.S.

0% 20% 40% 60% 80% 100% 120%

Not an incentive Not relevant Good incentive

Source: Banxico, Bank of America, 10/25/22.

iCRMH1123U/S-3228507-5/9 5
India is another beneficiary. As the world’s fifth largest economy, India is focused on moving further up the
league tables by playing a bigger role in global supply chains and manufacturing.22 By the end of the decade,
economists predict India will be the world’s third-largest economy.23 This surge in economic potential is
underscored by over $2 billion flowing into India ETFs this year.24
The list goes on – from Vietnam to Thailand, Indonesia, Brazil and beyond. These countries represent the bulk of
emerging markets outside of China. Given that China makes up 30% of emerging markets (EM), 25 investors are
increasingly segmenting EM exposures. China is not only large, but it also has its own opportunities, challenges
and nuances. So, more and more, we are seeing investors take a modular approach that actually splits China and
these other EM holdings. The approach of thinking about China, distinctly from other EM countries, allows
investors to dial up and down their China-specific exposure accordingly.

Conclusion
The bar has been rightfully raised for choosing equities over cash but there are high growth themes to meet that
hurdle. If investors want to capture them, they have to be intentional. The rise of the “Magnificent Seven” may
lead some to believe they are already well exposed to thematic growth. However, this may not be the case. We
analyzed a portfolio representative of US wealth investors’ broad allocations to equities, based on a study of 21K
portfolios over a 12-month trailing period. The analysis measures the average portfolio’s weighting across
different themes discussed in this outlook. The analysis measures the overlap between an existing portfolio and
different thematic indices identified by BlackRock.
The chart below shows the theme exposure of the portfolio. The total theme exposure is broken down into two
categories: mega-cap exposure (dilutive) and non mega-cap exposure (pure play). The results show low exposure
to key themes, particularly when it comes to pure-play names, or companies that focus specifically on products
or services related to a theme:

How much thematic exposure do you think you own?26

20.4%
Theme exposure (%)

4.9%
1.7%
0.1% 0.2% 0.6% 0.8%

% Mega-cap Exposure % Non Mega-cap Exposure

Source: BlackRock, Morningstar, BlackRock Portfolio Solutions as of June 30, 2022. Starting Portfolio Allocation is representative of advisors’ broad asset allocations for equities, based on
analysis of 21,276 portfolios over the 12-month trailing period. For more information as how exposures have been determined, please see footnote 26. Stacked bar chart showing the theme
exposure of the portfolio to BlackRock themes. The total theme exposure is broken down into two categories: mega-cap exposure (dilutive) and non mega-cap exposure (targeted). Mega-cap”
exposure is defined as companies (all Reg NMS domestic public companies) with market cap greater than $100B. “Non mega-cap” exposure is defined as companies with market cap below
$100B. The chart shows that the portfolio has low exposure to theme innovation with high concentration in mega-caps.

Only 1.5% of the average robotics and AI allocation is coming from firms with high sensitivity to the theme; the
rest comes from US-based, mega-cap firms in the technology and communication services sectors. In fact, no
theme above has more than ~1.5% pure play exposure, and the average is <1%.
Thematic strategies are built using a tailored construction process to best capture each themes value chain.
Owning a targeted basket of securities poised to benefit from the emergence of a theme can help investors
capture thematic outperformance – even in a world where rates are higher for longer.

iCRMH1123U/S-3228507-6/9 6
 Author Contributors
Linus Franngard Jeff Shen
Senior PM of Systematic Co-CIO of Systematic Active
Active Equities Equities

Scott Gladstone Jeff Spiegel

BlackRock Systematic Head of U.S. iShares Thematic,
Strategist International and Sector ETFs

Kevin Li Mariah Ward

Thematic Strategist Thematic Strategist

Samuel McClellan Erin Xie

Jay Jacobs Fundamental Equities
Strategist
Lead PM of Fundamental
Equities Health Sciences
U.S. Head of Thematics and Active Team
Equity ETFs, at BlackRock Mark Orans
Thematic Strategist

Related funds
Artificial intelligence
BlackRock Future U.S.
BTHM Themes ETF SOXX iShares Semiconductor ETF

iShares Robotics and Artificial iShares Cybersecurity and

IRBO Intelligence Multisector ETF IHAK Tech ETF

Medical innovation
iShares Neuroscience and
IBRN Healthcare ETF BMED BlackRock Future Health ETF

IBB iShares Biotechnology ETF

Globalization rewired
iShares U.S. Tech
EWW iShares MSCI Mexico ETF IETC Independence Focused ETF

iShares MSCI Emerging

INDA iShares MSCI India ETF EMXC Markets ex China ETF

iCRMH1123U/S-3228507-7/9 7
1 Morningstar, as of 09/30/2023. Total sum of AUM of Morningstar money market fund categories.
2 Slalom, “AI’s most powerful prompt,” 10/10/23.
3 Nvidia, “Saving Green: Accelerated Analytics Cuts Costs and Carbon,” 08/28/2020.
4 Nvidia, “What Is Accelerated Computing?,” 09/01/2021.
5 Morningstar, as of 10/31/2023. The average total return of the “Magnificent Seven” was 81%. The “Magnificent Seven” includes Microsoft Corp., Amazon.com Inc., Meta Platforms Inc.,
Apple Inc., Alphabet Inc., Nvidia Corp., and Tesla Inc. Past performance does not guarantee future results.
6 Morningstar, total return as of 10/31/2023. A price-to-earnings ratio measures the relationship between a company’s stock price and earnings per share (EPS). Index performance is for

illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
Past performance does not guarantee future results.
7 Morningstar, as of 10/31/23.
8 Investor’s Business Daily, “Baby Boomers Are Hitting Peak 65. What It Means For Retirement Planning,” 08/10/2023.
9 Inter Press Service News Agency, “The Historic Reversal of Populations,” 08/08/2016.
10 Alzheimer’s Association, “Alzheimer's Disease Facts and Figures,” 2023.
11 Biogen, “FDA Grants Traditional Approval for LEQEMBI® (lecanemab-irmb) for the Treatment of Alzheimer’s Disease,” 07/06/2023.
12 Alzheimer’s Association, “Alzheimer’s Association Statement on Donanemab Phase 3 Data Reported at AAIC 2023,” 07/17/2023.
13 BlackRock, “Diagnosis: Big opportunity in healthcare stocks,” 07/27/2023.
14 Statista, “Artificial intelligence (AI) in healthcare market size worldwide from 2021 to 2030,” 09/28/2023.
15 Fortune, “Scientists just used A.I. to map a fruit fly’s brain. Here’s why it’s a ‘turning point in neuroscience’,” 07/08/2023.
16 Fortune, “Scientists just used A.I. to map a fruit fly’s brain. Here’s why it’s a ‘turning point in neuroscience’,” 07/08/2023.
17 Drug Discovery and Development, “The Brain Knowledge Platform aims to illumine the brain’s cellular universe,” 06/10/2023.
18 Morgan Stanley, “Why Artificial Intelligence Could Speed Drug Discovery,” 09/09/2023.
19 BCG and Wellcome, Unlocking the potential of AI in Drug Discovery,” June 2023.
20 Gartner, “Beyond ChatGPT: The Future of Generative AI for Enterprises,” 01/26/2023. BCG and Wellcome, Unlocking the potential of AI in Drug Discovery,” June 2023.
21 Morningstar, as of 10/31/2023.
22 World Economic Forum, “This chart shows the growth of India’s economy,” 09/26/2022.
23 The Economic Times, “India set to be world’s third-largest economy by 2030: S&P Global,” 10/25/2023.
24 Global Business Intelligence, Bloomberg, as of 10/31/23.
25 Morningstar, as of 10/31/2023.
26 BlackRock, Morningstar, BlackRock Portfolio Solutions. Starting Portfolio Theme Exposure breaks out the percentage overlap of the Starting Portfolio Allocation and respective

megatrend product representative of its broader theme. Robotics & AI is represented by the NYSE FactSet Global Robotics and Artificial Intelligence Index. Semiconductors is represented
by the NYSE Semiconductor Index. Neuroscience is represented by the NYSE FactSet Global Biopharm & MedTech Index. Biotech is represented by the NYSE Biotechnology Index.
Cybersecurity is represented by the NYSE FactSet Global Cybersecurity Index. India is represented by the MSCI India Index. Mexico is represented by the MSCI Mexico IMI 25/50 Index.
“Mega-cap” exposure is defined as companies (all Reg NMS domestic public companies) with market cap greater than $100B. “Smaller-cap” exposure defined as market cap below $100B.
Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses before
investing. This and other information can be found in the Funds’ prospectuses or, if available, the summary
prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the
prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility
due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/ developing markets or in concentrations of
single countries.
Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors,
markets or asset classes and than the general securities market.
Technologies perceived to displace older technologies or create new markets may not in fact do so. Companies that initially develop a novel technology may not be
able to capitalize on the technology.
There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.
Actively managed funds do not seek to replicate the performance of a specified index. Actively managed funds may have higher portfolio turnover than index funds.
This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or
a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in
particular.
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt
any investment strategy. There is no guarantee that any strategies discussed will be effective.
The information presented does not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic
consequences of a given strategy or investment decision.
This material contains general information only and does not take into account an individual's financial circumstances. This information should not be relied upon as a
primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and
consideration should be given to talking to a financial professional before making an investment decision.
The information provided is not intended to be tax advice. Investors should be urged to consult their tax professionals or financial professionals for more information
regarding their specific tax situations.
The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, "BlackRock").

iCRMH1123U/S-3228507-8/9 8
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Bloomberg, BlackRock Index Services, LLC, Cboe Global Indices, LLC, Cohen & Steers,
European Public Real Estate Association (“EPRA® ”), FTSE International Limited (“FTSE”), ICE Data Indices, LLC, NSE Indices Ltd, JPMorgan, JPX Group, London Stock
Exchange Group (“LSEG”), MSCI Inc., Markit Indices Limited, Morningstar, Inc., Nasdaq, Inc., National Association of Real Estate Investment Trusts (“NAREIT”), Nikkei,
Inc., Russell, S&P Dow Jones Indices LLC or STOXX Ltd. None of these companies make any representation regarding the advisability of investing in the Funds. With
the exception of BlackRock Index Services, LLC, who is an affiliate, BlackRock Investments, LLC is not affiliated with the companies listed above.
Neither FTSE, LSEG, nor NAREIT makes any warranty regarding the FTSE Nareit Equity REITS Index, FTSE Nareit All Residential Capped Index or FTSE Nareit All
Mortgage Capped Index. Neither FTSE, EPRA, LSEG, nor NAREIT makes any warranty regarding the FTSE EPRA Nareit Developed ex-U.S. Index, FTSE EPRA Nareit
Developed Green Target Index or FTSE EPRA Nareit Global REITs Index. “FTSE®” is a trademark of London Stock Exchange Group companies and is used by FTSE
under license.

©2023 BlackRock, Inc or its affiliates. All Rights Reserved. BLACKROCK, iSHARES, iBONDS, LIFEPATH,
ALADDIN and the iShares Core Graphic are trademarks of BlackRock, Inc. or its affiliates. All other trademarks
are those of their respective owners.

iCRMH1123U/S-3228507-9/9 9