It might seem early to consider the influence Generation Alpha will have on stocks, but UBS suggests it’s worth pondering now. Born between 2010 and 2024, this cohort is set to become the largest of its kind, notes analyst Saranja Sivachelvam. Having emerged into an era dominated by advanced technology like AI, augmented reality, and widespread social media, they’re inherently different from previous generations. In 2024 alone, approximately $5.39 trillion is projected to be spent on this group, with an annual growth of $10 billion forecasted. By 2029, spending on Gen Alpha is expected to soar past $5.46 trillion, according to McCrindle.
Sivachelvam highlights the potential for both direct and indirect spending by Gen Alpha to significantly affect various industries, with their influence only growing over time. Their spending power, combined with that of their Millennial parents, marks them as a key consumer segment that brands would do well to understand early. This demographic could shape emerging trends that remain under the radar for now.
UBS identifies three primary areas where Gen Alpha diverges from past generations or can have a profound household impact: gamification, wellness, and sustainable living.
### Gamification
Gen Alpha’s engagement with video games is substantial, with 94% of them playing, more than any generation before, according to a 2024 study by Newzoo. They interact with gaming in unique ways, such as following gaming streams, engaging with esports, tuning into gaming podcasts, and participating in large gaming events. Additionally, they tend to spend an extra hour gaming compared to other enthusiasts.
Brands have already begun tapping into this space for advertising and customer recruitment, showing that companies targeting Gen Alpha gamers could potentially thrive in the medium term. UBS highlights companies like Electronic Arts, known for its self-owned games like Battlefield and licensed games like Madden NFL. Their focus on younger demographics can bode well as these players age and gain spending power. Take-Two Interactive is another company appealing to this younger audience, and while EA’s shares have dipped almost 12% this year, Take-Two’s have risen over 13%. Despite EA’s decision to cut its yearly forecast causing a drop, Take-Two saw gains following updates on game releases, such as the much-anticipated Grand Theft Auto VI. Meanwhile, Hasbro, with its successful franchise model and digital transformation of games, continues to hold a strong position in this space, with upcoming earnings reports on the horizon.
### Wellness
The Covid-19 pandemic has heightened Gen Alpha’s awareness of holistic health, says Sivachelvam. Parents of Gen Alpha are increasingly attentive to their children’s mental and physical health, surpassing the concerns Gen Z parents had over diet. This focus presents both opportunities and challenges for the wellness industry. One example is Ulta Beauty, which could see a larger addressable market, though there are concerns about potential misuse of products. Compared to Gen Z, Gen Alpha is engaging with beauty products much earlier, largely due to social media’s influence.
The wellness sector, particularly personal care and beauty, is forecasted by the Global Wellness Institute to grow at a rate of 4.8% annually from 2023 to 2028. Healthy eating is also a focus for Gen Alpha. In this area, UBS notes companies like Deckers Outdoor, with its Hoka brand showing remarkable growth. Despite some setbacks in revenue forecasts, demand remains strong. On Holding, another growing athletic footwear brand, indicates strong prospects in an industry where sportswear is still a small portion of the market. Ulta Beauty, with over 1,000 stores across the U.S., continues to attract a younger clientele, expanding its potential customer base significantly in just a few years.
### Sustainable Living
Finally, while sustainability might take some time to become a major investment theme, Sivachelvam believes this generation’s heightened environmental awareness will eventually translate into more eco-friendly behaviors compared to older generations. Although current consumption patterns don’t strongly reflect this shift, there is a future potential for Gen Alpha to drive changes in areas like food waste reduction, vegetarianism, and the pressures on fast fashion.
In summary, while Generation Alpha’s full impact may still be unfolding, they’re already influencing a wide range of market trends and industries, setting the stage for significant developments in the years to come.
