A few weeks ago, VettaFi announced an AI symposium at the end of the month. Our hope was to bring some of the leading experts in asset management to discuss how the future is fast approaching. AI was a buzzword in the beginning of the year, and many agreed that it had long-term potential. But has 2023 really been when AI-focused ETFs were a priority?
Nvidia’s Strong Results Prove AI Is Not a Fad
As of last Friday, nearly 900 people registered to join VettaFi on August 30 to hear from industry experts and top asset managers discuss artificial intelligence. (Join us by registering, there’s still room.) This was days after semiconductor giant Nvidia reported impressive quarterly results, driven by demand for AI chips. Revenues doubled from a year earlier to $13.5 billion and skyrocketed 88% from three months ago. Analysts were already expecting strong growth in the coming quarter. Still, Nvidia’s revenue forecast of $16 billion easily exceeded the forecasts.
“The world has something along the lines of about a trillion dollars worth of data centers installed, in the cloud, enterprise and otherwise,” Nvidia CEO Jensen Huang said on a call with analysts, according to CNBC. “That trillion dollars of data centers is in the process of transitioning into accelerated computing and generative AI.”
For much of 2023, Nvidia has been the darling of the investment world due to demand for its AI chips. Alphabet, Amazon, Meta Platforms, and other companies purchase Nvidia chips to support their own growth opportunities.
See related: Rosenbluth Digs into the Types of AI Funds
Almost 300 ETFs Own a Top Stake in Nvidia
According to VettaFi, there are 297 U.S. listed ETFs that have a top 15 position in Nvidia. Some are index-based thematic ETFs like the Global X Robotics & Artificial Intelligence ETF (BOTZ). BOTZ recently had a 15% stake in NVDIA.
In a recent research piece, Global X wrote “The AI boom will likely spur a data center upgrade cycle that favors a new computing stack with the GPU (graphic processing unit) at its core. The rapid proliferation of LLMs (Large Language Models) will likely result in exponential demand for AI processing and accelerated spending on specialized chips, which could open a hundred-billion dollar plus market for GPUs in the near future.”
Global X is one of VettaFi’s partners for the AI symposium on August 30. Pedro Palandrani, director of research at Global X, will be speaking to me at 11:20am ET.
Looking Beyond Nvidia
While BOTZ has $2.2 billion in assets, other ETFs heavily exposed to Nvidia are less widely held. For example, the Spear Alpha ETF (SPRX) is an actively managed disruptive technology ETF with a 9.7% stake in Nvidia. Despite rising an impressive 45% thus far in 2023, SPRX has just $11 million in assets.
“AI is not just one component of our ETF,” explained Ivana Delevska, manager of SPRX. “It is the most important theme in our portfolio and affects approximately 90% of our holdings.” The ETF invests across the value chain, including data management and streaming companies. It also invests in enterprise software companies, where AI will be embedded in tools like CRM systems. SPRX also has top positions in companies like Advanced Micro Devices, Confluent, and Snowflake. Delevska will be sharing more about her favored companies at the AI symposium with my colleague Tom Lydon at 12:25 pm.
The AI Symposium Will Focus on Active ETFs
At 12:45 pm, the final session will be a discussion about how active managers are thinking about AI. Joining me will be Marissa Ansell, head of thematic client portfolio management at Goldman Sachs Asset Management. The managers behind the Goldman Sachs Future Tech Leaders Equity ETF (GTEK) also see AI emerging as a key theme even though they don’t have a top-15 stake in Nvidia.
During the second quarter, GTEK initiated a position in MongoDB as fund management believes the company is set to benefit from the growing need for databasing infrastructure around AI. The company provides database solutions that help aggregate, clean, and finetune the data required for Large Language Models that power generative AI applications. As AI becomes a key driver in the market’s future revenue and margin expansion, Goldman Sachs believes that MongoDB is well positioned to grow its market leadership in this space.
For more news, information, and analysis, visit VettaFi | ETF Trends.