After the close of U.S. markets Wednesday, Nvidia (NVDA) told analysts and investors that its fourth-quarter sales surged a jaw-dropping 265%. That was helped in large part by demand for artificial intelligence (AI) chips.
That’s further confirmation that “AI enablers” are delivering investors. That’s good news for ETFs like the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), which are heavy on AI enabler stocks.
Edward Stanley, Morgan Stanley’s head of thematic research in Europe, points out about half of the S&P 500 YTD returns are attributable to shares of a trio of AI enabler stocks, including Nvidia. That also explains why QQQ and QQQM are each higher by nearly 4% year to date. Adding to the allure of those ETFs is the point that both are chock full of AI enablers and adopters. The latter could propel the next wave AI-related upside.
AI Adopters Matter, Too
Nvidia now ranks as the third-largest domestic company by market value. And AI enablers are commanding ample attention in their own rights. So it’s easy to understand why so many investors are enamored by the artificial intelligence enabler thesis.
However, the AI adopter thesis — both consumer and enterprise — is potentially potent in its own right and it’s one that’s also accessible via QQQ and QQQM. Enterprise adoption is likely to be the leader and the segment most focused on by the investment community.
“From a more enterprise perspective, open-source models are interesting to track. And we do, almost daily, to see what’s going on. The people and companies downloading these models are likely to be using them as a starting point – for fine-tuning their own models,” noted Stanley.
In what could prove to be a virtuous circle and one with positive implications for QQQ and QQQM, the more AI adoption increase, the more benefits accrue to enablers. That’s relevant when discussing QQQ and QQQM because industry-level artificial intelligence adoption is potentially expansive. That indicates there’s an array of end markets for enablers to tap into.
“Their applications can range from disruption within the music industry, personalized beauty advice, applications in autonomous driving, or machine vision in healthcare. The list goes on and on. The speed of AI diffusion into non-tech sectors is really bewildering,” observed Stanley.
For now, AI adopters are trailing their enabler counterparts in terms of share price performance. But that could change over time. And that could potentially bring more upside for QQQ and QQQM along the way.
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