AI, Biotech, Energy Sectors Expect M&A Revival For 2024
Portfolio Pulse from Neil Dennis
Experts predict a resurgence in M&A activity in 2024 after a slump in 2023, with AI, biotech, and energy sectors expected to lead. Morgan Stanley's Tom Miles and Pitchbook's Tim Clarke attribute the 2023 downturn to market volatility and high interest rates, which particularly affected private equity firms. M&A volumes fell to $2.4 trillion in 2023 from $5.2 trillion in 2021. Microsoft's partnership with OpenAI, potential biotech acquisitions, and big oil deals like ExxonMobil's purchase of Pioneer Natural Resources and Chevron's acquisition of Hess Corp are highlighted. ETFs like IYW, BOTZ, IBB, and XLE, as well as the Russell 2000 index, could benefit from the anticipated M&A uptick.
January 29, 2024 | 2:03 pm
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NEUTRAL IMPACT
Chevron's $53 billion acquisition of Hess Corp signals a potential increase in M&A within the energy sector, possibly affecting CVX stock.
Chevron's significant acquisition could lead to further consolidation in the energy sector, potentially influencing its stock price and investor outlook.
CONFIDENCE 90
IMPORTANCE 85
RELEVANCE 90
NEUTRAL IMPACT
Microsoft, despite regulatory scrutiny, is closely tied to AI through its partnership with OpenAI, which could influence its M&A strategy and investor sentiment.
While Microsoft is not seeking ownership of OpenAI, its significant involvement in AI could make it a key player in the sector's M&A activity, potentially affecting its stock price.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEUTRAL IMPACT
ExxonMobil's acquisition of Pioneer Natural Resources for $60 billion is indicative of the energy sector's consolidation trend.
ExxonMobil's large-scale acquisition demonstrates its aggressive M&A strategy, which could impact investor sentiment and the stock's performance.
CONFIDENCE 90
IMPORTANCE 85
RELEVANCE 90
POSITIVE IMPACT
Global X Robotics & Artificial Intelligence ETF, tracking key AI and robotics firms, may be influenced by M&A activity in the AI sector.
With AI expected to be a hotbed for M&A, BOTZ stands to gain as it includes companies that could be involved in these deals, either as targets or acquirers.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The iShares Biotechnology ETF, with holdings like Vertex Pharma and Regeneron Pharma, could be impacted by biotech sector M&A.
As M&A activity is expected to pick up in the biotech sector, IBB, which holds potential acquirers, could see an uptick in investor interest and valuation.
CONFIDENCE 75
IMPORTANCE 65
RELEVANCE 75
POSITIVE IMPACT
The iShares U.S. Technology ETF, with top holdings like Microsoft, Apple, and Nvidia, could see an impact from increased M&A activity in the tech sector.
As M&A activity is expected to rise in the tech sector, ETFs like IYW that track this sector could benefit from increased investor interest and potential valuation gains in its holdings.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
Krystal Biotech, with its pipeline of gene therapies, is seen as a potential M&A target, which could affect its stock price.
As a potential acquisition target due to its valuable pipeline, KRYS could see stock price movements based on M&A speculation or actual deal announcements.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90
POSITIVE IMPACT
Ventyx Biosciences, with its small market cap and phase two trials, could be an attractive M&A target, influencing its stock.
Given its status as a potential acquisition target and its founder's history of selling a previous enterprise, VTYX could experience stock volatility due to M&A activity.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 85
POSITIVE IMPACT
The Energy Select Sector SPDR Fund, with top holdings in Exxon, Chevron, and ConocoPhillips, may benefit from energy sector M&A.
With the energy sector poised for more M&A, XLE, which includes companies likely to be acquirers, could see positive impacts on its performance.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80