You’ve probably seen a screenshot by now of the OpenAI chatbot ChatGPT responding to a prompt. The software has taken the internet by storm with discussions surrounding its pros and cons. The product recently received a $10 billion investment from Microsoft (MSFT), underscoring how AI-type advances can bolster the case for AI ETFs like the ARK Next Generation Internet ETF (ARKW).
While big tech and AI names like Google (GOOGL) and Meta (META) have been a bit more cautious on AI, ChatGPT has taken things up a notch for the space. META employees find themselves sharing memos urging the company to speed up its AI, while internal GOOGL staff are taking similar looks at accelerating their work on AI. Further, the app’s quick spread around the internet has ignited conversations on how it might impact everything from education to whole parts of industries.
ChatGPT (Generative Pre-trained Transformer) relies heavily on its Reinforcement Learning component, specifically a technique called “Reinforcement Learning From Human Feedback” (RLHF), which uses human feedback in its loop to minimize harmful, untruthful, and/or biased outputs. Its openness to the public even in such a learning state will allow OpenAI to assess how it might impact the world when freely used — for good or for ill.
Its spread makes the case for AI ETFs as a source of disruptive innovation, with ARKW a notable candidate for exposure to the space. ARKW actively invests in companies that are set to benefit from advances in cloud computing, big data, and artificial intelligence, among other tech areas. The strategy charges 88 basis points for its exposures, including names like Coinbase (COIN), Block (SQ), and Twilio (TWLO).
The ETF has added $11.4 million in one month net inflows and has significantly outperformed its ETF Database category average and FactSet segment average over one month, returning 26.5% in that time.
While ChatGPT may not reflect “True Artificial Intelligence,” its learning model and its popularization represent a big change in how markets and the public at large understand AI’s power. MSFT’s investment marks another step for the broader tech space taking AI learning like ChatGPT seriously, and merits investor attention to the space moving forward as well.
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