From stormy weather to clear skies

Biotech and health care innovation These two areas of the market continue to sit in the penalty box in the wake of the Federal Reserve’s unprecedented rate-hike regime. But we think they could be on the ice again soon, thanks to underappreciated innovations. Consider the new obesity treatments. Firms have developed a robust pipeline of drugs to address this decades long public health crisis. Annual spending on weight loss products is now roughly $33 billion in the U.S. alone, according to Boston Medical Center. Today, more than 50 next-generation obesity drugs are either in clinical development or have positive Phase 3 data. The next frontier could be technology-powered drug discovery. For example, AI could lower costs by using predictive modeling to pinpoint early-cycle drugs likely to be successful and worth developing.

Manufacturing renaissance Just like health care and biotech, manufacturing has been struggling lately but is poised for a better 2024. Spending on U.S. manufacturing has doubled in just over a year to an annualized $200 billion, with a cumulative $650 billion in “mega projects” announced in North America over the last few years. This boom is driven by four main trends: firms waking up to the benefits of reshoring following the pandemic; technological advances leading to higher energy productivity; an aging aerospace fleet soon in need of replacement; and increased data-center demand thanks to AI.

Tectonic shifts in chips The end of Moore’s Law has long been on chipmakers’ minds. The worry is that trying to increase capacity by setting transistors in ever-closer proximity will eventually be derailed by ever-higher temperatures. But “chiplets” could be used to stitch together multiple wafers, which could potentially not just restore, but upend Moore’s Law. Jeffries estimates this technique could increase the amount of chips per chipset by as much a hundred fold. Rather than chips getting progressively smaller, they could expand, creating opportunities in how they are built and packaged.