Astute investors know the internet is a prime proving ground for various AI applications. There are deep intersections between this emerging technology and companies previously viewed as pure-play internet names.
In fact, some firms previously considered to be among the most “pure” internet stocks are also among today’s internet leaders. Fortunately, investors don’t have to stock-pick to that effect. That’s because the ALPS O’Shares Global Internet Giants ETF (OGIG) is home to several AI leaders.
The $161.1 million OGIG follows the O’Shares Global Internet Giants Index. The ETF has deep AI credibility because it has more flexibility than many legacy funds in the category. Many of those ETFs are heavily allocated to communication services and consumer discretionary stocks. But OGIG devotes nearly half its roster to the technology sector. That allows it to be a viable, if not unheralded, AI play.
Exploring OGIG’s AI Chops
With its ability to hold technology stocks, OGIG is home to some familiar AI leaders. Those include Microsoft (MSFT). That’s the ETF’s largest component, at 6.20%. And it’s an advantageous one for investors.
“Microsoft is one of three public cloud providers that can deliver a wide variety of PaaS/IaaS solutions at scale. Based on its investment in OpenAI, the company has also emerged as a leader in AI,” noted Morningstar’s Dan Romanoff. “Microsoft has also enjoyed great success in upselling users on higher-priced Office 365 versions, notably to include advanced telephony features. These factors have combined to drive a more focused company that offers impressive revenue growth with high and expanding margins and deepening ties with customers.”
Regarding OGIG’s flexibility, the ETF also features exposure to international equities, meaning it’s global in nature. China is the ETF’s second-largest geographic weight. That’s meaningful because that country and the U.S. are widely viewed as the world’s AI leaders.
Many of the ETFs that compete directly with OGIG are solely focused on domestic stocks, meaning they don’t’ feature exposure to the likes of Alibaba (BABA) and Tencent (TCEHY), which are also among Morningstar’s top AI stocks to own. Both names are part of the OGIG portfolio.
Improved Advertising Technology
“Tencent holds a prominent position in China’s internet sector, with a diverse portfolio of products and services used daily by a significant portion of the population,” said Ivan Su of Morningstar. “The most immediate and measurable impact of Tencent’s AI investments will come from improved advertising technology, which enhances content recommendations and lowers ad creation costs.”
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