The first wave of the AI boom was dominated by the “enablers.” Those are companies like Nvidia (NVDA), Alphabet (GOOG), and Facebook parent Meta Platforms (META), among others.
Share price appreciation by those enablers and others have fueled gains for the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). Those two ETFs are heavy on many of the leading large-cap artificial intelligence names. Of course, enablers need adopters to, well, adopt to ensure long-term success for any new disruptive technology.
When it comes to AI, the encouraging point for investors considering individual equities as well as funds such as QQQ and QQQM is that AI has applications in a variety of industries. Already, AI is making its presence felt in the healthcare and industrial sectors, to name just two. And financial services could power another lengthy wave of AI adoption.
QQQ Holdings Can Benefit From Financials’ AI Adoption
QQQ and QQQM follow the Nasdaq-100 Index (NDX). That index is a gauge of the 100 largest nonfinancial Nasdaq-listed firms. Despite the exclusion of financial services firms (the ETFs have a 0.48% weight to that sector), QQQ and QQQM are more than adequately levered to the theme of AI expansion in this industry. That’s a good thing, because financial services is viewed as fertile territory for AI adoption.
“The financial services industry is no exception to this trend. Just as the emergence of fintech enabled enhanced algorithmic trading and customized portfolio management, artificial intelligence has the potential to drive a new wave of opportunities to improve efficiency, customization and agility in investment management,” noted J.P. Morgan Asset Management.
As AI stands today, most experts believe it’s flawed and unreliable regarding overt securities selection. However, that doesn’t diminish the technology’s potential potency in other areas of financial services. AI can optimize portfolio construction. And the use of large-language models (LLM) make trading in size more efficient.
“Given the increasing size, frequency and complexity of trades, AI can help traders reduce transaction costs and improve execution. For instance, an LLM interface can quickly provide traders with relevant pricing data across exchanges while helping identify the best time, size and venue for trades,” added J.P. Morgan.
Bottom line: Artificial intelligence can fill a lot of voids in the financial services space. Thus, it’s not surprising the industry is one of many expected to boost use of the technology over the next six months.
For more news, information, and analysis, visit the ETF Education Channel.
