It’s not too early for investors to start thinking about the impact of Generation Alpha on stocks, according to UBS. The generation, born between 2010 and 2024, is likely to be the largest of its lifetime, analyst Saranja Sivachelvam said in a note Wednesday. It is also the first to be born into a high-tech world of artificial intelligence, augmented reality and social media. An estimated $5.39 trillion is spent annually on the generation, as of 2024, and is projected to grow by $10 billion every year — surging past $5.46 trillion by 2029, according to research firm McCrindle . “This suggests that their direct and indirect spending decisions could have a wide impact on industry with immediate effect, with this influence getting stronger over time,” Sivachelvam wrote. “Their potential influence over, and combined spending power with, their Millennial (Gen Y) parents could make them an attractive consumer segment to understand early, and may drive trends that we are currently unaware of.” The firm sees three key areas where the generation differs from previous ones or can make a meaningful impact at the household level: gamification, wellness and sustainable living. Gamification Some 94% of Gen Alpha play video games, more than any other generation, according to a 2024 global study by Newzoo, a provider of video game data. They also engage in video games in different ways more so than their older counterparts. That could include following gaming channels or esport broadcasters, listening to gaming podcasts and/or attending large in-person gaming conventions, Sivachelvam said. In addition, the cohort spends an extra hour on video games and an hour less on social media compared to other game enthusiasts, she said. Already, brands are advertising and recruiting new customers through gaming platforms, she noted. Sivachelvam expects companies that cater to Gen Alpha gamers could be winners in the medium term. These are some of the names UBS sees as exposed to the Gen Alpha gamification theme. Gaming company Electronic Arts has games that are based on wholly-owned intellectual property, such as Battlefield, or licensed intellectual property, like Madden NFL, Sivachelvam said. “Game engagement skews to younger demographics, suggesting companies such as EA stand to benefit as these cohorts age and spending power increases,” she said. Take-Two Interactive , another gaming company, also skews to younger demographics, she said. Shares of Electronic Arts are down nearly 12% year to date, while Take-Two Interactive’s stock is up more than 13%. In January, Electronic Arts cut its full-year guidance , which sent the stock tumbling. Earlier this month, Take-Two Interactive posted net bookings for its fiscal third quarter that came in below expectations, but the stock rallied after the company gave updates about the timing of new game releases, including Grand Theft Auto VI. Meanwhile, Hasbro is a leading toy and game company. It has built successful franchises and has digitized analog games, Sivachelvam noted. Hasbro is set to report fourth-quarter earnings on Thursday. Wellness The Covid pandemic accelerated awareness of holistic health for Gen Alpha, Sivachelvam said. “Our research shows that Gen Alpha is concerned about its mental and physical wellbeing, with parents of Gen Alpha materially more concerned about their children’s diet than parents of Gen Z,” she wrote. “This is both an opportunity (larger [total addressable market], e.g. Ulta Beauty) and concern (inappropriate use of products.” In fact, the cohort is engaging in beauty products four to five years ahead of their Gen Z counterparts thanks to social media, she added. The personal care and beauty sector is the largest within the wellness industry, she said. The Global Wellness Institute estimates the sector will grow at a 4.8% compound annual growth rate from 2023 to 2028. In addition, the generation is also focused on healthy eating. Here are some of the names UBS said are exposed to the Gen Alpha wellbeing theme. Deckers Outdoor owns the Hoka brand, which has experienced outsized growth, Sivachelvam said. She expects demand to remain robust. Deckers posted an earnings and revenue beat for its fiscal third quarter in January. However, its full-year revenue guidance fell short of the consensus estimate. Meanwhile, On Holding is one of the fastest-growing athletic footwear brands, Sivachelvam noted. “Sportswear is still only 25% of total apparel and footwear industry sales, therefore we believe the industry can maintain strong growth rates,” she said. Lastly, Ulta Beauty is the largest beauty retailer in the U.S., with more than 1,000 stores across 48 states, Sivachelvam pointed out. “Ulta is engaging with younger consumers, and grouping this together with its legacy beauty enthusiast cohort (women over 18 years of age), takes its pool of potential addressable customers to around 140m of all genders aged 13-plus in 2024 versus 70m in 2021 of females aged 18-plus.” Sustainable living Finally, sustainability is something that may take some time to turn into an investable theme, Sivachelvam said. “While we think this cohort is more aware of the environment and therefore expect that this could — over time — result in behaviours that are more environmentally beneficial versus older generations, their consumption patterns do not necessarily reflect this right now,” she wrote. Eventually, Gen Alpha could change or influence behaviors around food waste, vegetarianism and fast fashion, Sivachelvam said.
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