A year ago, I’m pretty sure I had little idea what artificial intelligence (AI) was and what it could become. While there were a few related ETFs, AI was just another one of the long-term investment themes. Of course, then the public release of ChatGPT occurred, and many companies saw the top- and bottom-line growth from AI begin to emerge. Many growth and information technology-laden ETFs climbed sharply this year.
As we head toward 2024, AI is the theme to watch. During a Harbor Capital Advisors webcast at the end of November, VettaFi asked a key question. “What do you believe will be the largest structural growth opportunity as we head into 2024?” Most advisors (55%) chose artificial intelligence, while another 18% included it along with semiconductors and electric vehicles. As a standalone, semiconductor (18%) was a distant second.
VettaFi believes we are in the early stages of AI. The potential for investors is one of the reasons VettaFi acquired the ROBO Global Index suite in 2023. AI is a paradigm shift that will reverse engineer the digital and physical world and provide solutions for our most important problems of our time. As we approach the next stage of deployment we will see increased demand s enhance grow across networking, security, and multi-modal AI capabilities and enablers.
Broad Growth and Tech ETFs Benefitting from AI
The Invesco QQQ Trust (QQQ) and its lower-cost sibling the Invesco NASDAQ 100 ETF (QQQM) were up 46% year-to-date as of early December, easily outperforming the 21% gain for the S&P 500 Index. The Technology Select Sector SPDR ETF (XLK) rose 48%. Mega-cap growth stocks like Alphabet, Amazon.com, Meta Platforms, Microsoft and NVIDIA were among the strongest performers in the broader market indexes due in part to AI. However, these ETFs also are impacted by industry trends. Some investors have sought out more targeted, and strong performing, thematic ETFs.
AI Driven ETFs Are Different
The Global X Artificial Intelligence & Technology ETF (AIQ) pulled in approximately $570 million in new money in 2023. The ETF now has close to $800 million in assets. AIQ rose 47% so far in 2023. Top holdings include Amazon.com and Meta Platforms but also Adobe and ServiceNow.
The ROBO Global Artificial Intelligence ETF (THNQ) added $75 million this year and now manages $115 million in assets. THNQ climbed 48%. While this is like AIQ, the two portfolios are different. THNQ’s top positions include Alteryx, Cloudfare, Crowdstrike, Palo Alto Networks, and Splunk. Mega-cap growth stocks are less represented in THNQ than peers.
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In May 2023, the Roundhill Generative AI & Technology ETF (CHAT) launched. The fund recently managed $60 million in assets. The fund is more concentrated in the mega-cap growth companies than its peers. NVIDIA, Microsoft, and Alphabet are each more than 5%-of-assets. Companies like Arista Networks and Marvel Technology can also be found in the portfolio.
Join This VettaFi Event and Be Smarter About AI
VettaFi will be hosting a webcast on Friday December 8 to talk about the year of AI and more importantly what’s ahead for the future. As an advisor you likely have lots of questions. I hope you can join us. Registration remains open.
For more news, information, and analysis, visit VettaFi | ETF Trends.