Will Rising Fossil Fuel Prices Boost Battery Tech Investing?

It’s hard to avoid the U.S.-Israel-Iran war in the news — or at the pump. Energy prices are rising worldwide as the Strait of Hormuz remains closed. That will likely drive inflation up worldwide, impacting rate markets as well as portfolio performance for the rest of the year. Of course, even amid volatility, opportunities abound for the savvy investor. Indeed, events this year may prove a catalyst for investment in battery technology, with the Amplify Lithium & Battery Technology ETF (BATT) a key option.

Key Takeaways:

• Energy costs are on the rise, but even amid volatility, opportunities abound.
• While U.S. investors may believe EVs are on a global downtrend, worldwide demand is rising in key markets.
• Advances in tech and rising prices may boost battery tech investing for the right investors.

BATT, energy, and the future of battery technology all came up during the recent VettaFi webcast, “Modern ETF Solutions for the Next Era of Energy.” Hosted by VettaFi Head of Research Todd Rosenbluth and VettaFi staff writer Ben Hernandez, the webcast included input from TMX VettaFi Head of Index Product Strategy Jane Edmonson and Amplify ETFs Founder and CEO Christian Magoon.

The discussion saw Rosenbluth and Hernandez ask the pair of guests to analyze both the economic trends and technological advancements boosting the case for battery tech investing. With webcast attendees indicating a growing interest in thematic ETFs, Edmondson explored the rising role of indexes like BATT’s, the EQM Lithium & Battery Materials Index. The index looks to provide exposure to the broader supply chain for batteries up to and including EVs. 

According to Edmondson, that investing thesis is backed by a “triple demand” scenario. First, while U.S. observers may see EVs suffering from the Trump administration’s hostility, globally, EV adoption is growing in leaps and bounds. 

Key metals suppliers in the supply chain may be seeing a metal commodities supercycle, she said, pointing to reduced trade tensions and limited overcapacity. Finally, she also underscored improvements in battery and fuel cell storage as a factor. 

Technological advances like reduced lithium use in batteries has helped improve battery performance in colder climates, too. Major firms like Toyota, Nissan, and Honda — as well as startups like Solid Power, for example — are working on solid state batteries to perform better in those environments. 

“Battery storage systems are experiencing considerable growth, and then also the falling battery costs have really upped the return on investment for battery storage projects,” she said. “So, that’s a very fast-growing area as well, with 43% year-over-year growth.”

The Middle East situation, she added, could help catalyze those underlying factors into a big year for battery tech investing. 

“I think this situation in the Middle East has caused people to rethink, too, the kind of vehicles that they want to drive. Because, obviously, gas prices are very high right now, and that’s probably now going into consumer thinking where it wasn’t previously,” she said.

How, then, does BATT approach that rising tide and key trend as an ETF? According to Magoon, whose firm operates the ETF, it looks to tap into all of those subtrends. 

“It’s hard to prioritize any one of them, and this ETF really takes advantage of all three of those areas of demand by owning battery storage solutions, battery metals and materials, as well as having about 20%-ish exposure to electric vehicles,” Magoon said. 

“You will recognize many of these names that are either mining the metals or in materials that are part of batteries, creating the technology, a lot of the chips essentially that are optimizing these high-tech batteries or our leading vehicle manufacturer,” he added.

Specifically, BATT charges a 59 basis point fee to track the above index. The strategy, which launched in 2018, has returned 104.36% over the last twelve months according to ETF Database data. The fund has also returned 17.18% over the last month. That has helped the battery tech investing ETF outperform the ETF Database Commodity Producers Equities category average over one-month and one-year periods.

Looking ahead, the fund’s global view, especially in light of recent events, could make it an appealing player for portfolios. According to Magoon, advisors are using it for thematic growth, an energy transition complement, and, finally, a tool to capitalize on long term electrification. For those wanting to add more thematic ETF exposure, BATT may appeal.