Generative artificial intelligence (AI) is widely viewed as a disruptive technology, and it is. That’s the form of AI most familiar to end users and market participants. Being a disruptive technology means investment implications for the technology sector. But other sectors and industries stand to benefit from generative AI’s evolution.
Investors may not want to engage in burdensome stock-picking to capitalize on the AI opportunity set. They could consider ETFs such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
The two Invesco ETFs allocate about half their rosters to tech stocks, confirming their viability as large-cap avenues for AI exposure. However, QQQ and QQQM also offer investors the benefit of healthy exposure to other sectors that can benefit from evolving generative AI applications. Those groups include communication services and consumer discretionary, among others.
Generative AI Expanse Could Lift QQQ, QQQM
By now, many investors are familiar with forecasts ascribed to generative AI. Some are credible, others not so much. But the ones in the former category could prove potent for ETFs like QQQ and QQQM. Consider the following from Morgan Stanley.
“For example, the evolution of AI tools could deliver a $6 trillion opportunity across advertising, e-commerce, travel, the shared economy and the cloud, based on their ability to digitize untapped offline spending,” noted the bank. ”On a macroeconomic level, Morgan Stanley Research expects that more than 40% of occupations, with associated labor costs of $4.1 trillion in the U.S. alone, will be affected by generative AI in the next three years.”
Advertising, cloud computing, and e-commerce are industries hailing from the communication services, technology, and consumer discretionary sectors. Those are the top three sector exposures in QQQ and QQQM, combining for more than 81% of the ETFs’ rosters.
With the holiday shopping season in full bloom, and with consumer cyclical stocks representing more than 14% of the QQQ and QQQM rosters, the intersection of generative AI and e-commerce is noteworthy. That’s particularly so for long-term investors. Importantly, that intersection is in its early innings, implying a long runway for growth.
“We think these early applications could lead to more durable growth in online ad revenue for leading search and social platforms,” said U.S. Internet Analyst Brian Nowak. “Incremental growth will be important as we head into 2024. But it is encouraging that some industry experts already speak to mid-to-high single digit conversion lifts on social media from incorporating generative AI and a double-digit lift on search.”
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