Thanks in large part to all the attention heaped upon artificial intelligence (AI) this year, the investment opportunities tied to automation are receiving renewed attention.
For the uninitiated, there are indelible links between AI and automation, but the latter is older than many market participants realize. It’s also accessible via broad-based exchange traded funds, including the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
The tech-heavy positioning of those products coupled with their large/mega-cap emphasis could be appealing for investors looking to access the automation theme while eschewing stock picking. QQQ and QQQM are appropriate today because automation has far-reaching applications in everyday society.
“Declines in cost and accelerating developments in technologies that power automation—including the recent breakthroughs in generative AI programs capable of having human-like conversations, creating articles and even editing computer code. Now, after years of saving, many companies are primed to begin deploying capital into these technologies,” noted Vijay Chandar, investment strategist at Morgan Stanley Wealth Management.
Some investors may be drawn to QQQ and QQQM as avenues to automation investing because of the growth/tech traits offered by these ETFs. That’s an accurate assessment, but automation is supported by much more than just evolving tech demands.
Consider demographics. Many large developed and some major emerging economies are homes to rapidly aging populations. Those countries also lack the labor force depth need to replace retiring workers on a one-for-one basis. Enter automation as a solution.
“Aging populations and, in many parts of the world, a shrinking labor supply will have a material impact on the global economy in the coming decades. According to the World Bank, Europe, Japan and China, for instance, are all forecast to see declines in their working-age populations over the next 20 years, and productivity gains will likely be necessary just to keep economic output from declining in these regions,” added Chandar.
Another reason that QQQ and QQQM are relevant in the AI/automation conversation is because the Invesco ETFs are homes to companies that are integral in driving costs of these technologies lower while enhancing efficiencies.
“Improvements in computer hardware components such as semiconductors and the development of more advanced software play a big role. In addition, the rise of big data has made it easier and more affordable to ‘train’ AI to properly interpret and process vast troves of information in the complex ways needed to power automation,” concluded Chandar.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.