Look Beyond Alphabet and Microsoft for AI Growth | ETF Trends

The artificial intelligence (AI) revolution has the potential to disrupt industries on a larger scale than the PC and internet boom of the late 1990s and the smart phone surge in the 2000s. A safer investment bet lies in the AI development and infrastructure landscape, which encompasses hardware and software components such as GPUs, computer, storage, networking, DevOps, and data environments. This sector is set to unlock trillions of dollars in GDP while continuing to capture a larger market share.   

As of 2022, AI adoption rates have remained below 50% across enterprises and governments, but rapid global adoption is now underway. Interestingly, even dominant players in the tech industry may face challenges and disruptions. The rise of custom, personalized artificial intelligence agents with real-time user-interface creation could potentially decentralize the big tech landscape, making the road ahead uncertain, even for giants like Alphabet and Microsoft.  

While companies like Microsoft have found renewed success in artificial intelligence innovation, it is too early to declare any big tech firm as the ultimate winner in this fast-evolving domain. The AI landscape, in its early stages, is experiencing rapid changes, similar to those in the EV industry. Predicting the specific winners in AI is as challenging as identifying the future leading brands in the EV race. However, it is evident that the AI development and infrastructure sectors are more likely to emerge as victors as a modern, high-tech “picks-and-shovels” play.  

As we enter the AI era, staying abreast of the rapidly changing landscape is crucial. AI could revolutionize work and the world as we know it, and investors should diversify their portfolios by exploring various components of the AI space, such as semiconductor chips and cloud computing centers. This also includes companies that are involved in more autonomous systems and edge devices, real-world tracking such as in computer vision, factory automation, and even applications such as e-commerce and consumer, healthcare, cybersecurity, and business processes. Examples of these companies include ASML, Arista Networks, Global Unichip, and Samsara.   

The ROBO Global Artificial Intelligence Index (THNQ index) provides an allocation into the infrastructure and applications driving AI innovation and is actively rebalanced to reflect changes in companies’ competitive AI contributions and capabilities. Unlike traditional indices like the Nasdaq 100 or S&P 500, which are overweight by market cap, the THNQ index offers better diversification and exposure to the AI ecosystem and organizations primed to grow into more influential players in society, including lesser-known underlying tech. This approach may provide investors with a better opportunity to capitalize on the massive potential of AI while mitigating risks associated with focusing solely on big tech companies.  

The THNQ index, which is part of a suite of ROBO Global Indexes recently acquired by VettaFi, is tracked by the ROBO Global Artificial Intelligence ETF (THNQ).

Source: Index fact sheet, last updated April 24, 2023


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VettaFi LLC (“VettaFi”) is the index provider for THNQ, for which it receives an index licensing fee. However, THNQ is not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing or trading of THNQ.