Generative artificial intelligence is the AI genre that’s fueled enthusiasm for this disruptive technology. But astute investors know that the AI story is rapidly evolving, and they’re asking, “What’s next?”
One of the answers to that query could be AI further making its way into consumer services, driving the need for edge AI advancements. That could be a catalyst for ETFs including the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
“Edge” refers to hardware at the edge of networks. That’s meaningful to investors considering QQQ and QQQM. That’s because the ETFs’ rosters are loaded with companies that are major providers of technology hardware. This further cements the Invesco ETFs’ status as viable options for investors seeking AI exposure without some of the risks associated with thematic strategies.
Edge Hardware Growth Via AI Is Compelling
The expected growth for edge hardware vis a vis AI and other catalysts is arguably too compelling to ignore.
“The US data firm Gartner estimates that by 2025, half of enterprise data will be created at the edge, across billions of battery powered devices. The key benefits of AI computation performed at the Edge are lower cost, lower latency personalization and importantly, higher security or privacy relative to centralized cloud computing,” noted Ed Stanley, Morgan Stanley’s head of thematic research in Europe.
Further highlighting the potential appeal of QQQ and QQQM as edge hardware plays is the sheer expense of the edge. It could be the foundation of more than 30 billion devices over the next several years, according to Stanley.
That’s likely to create demand for advanced edge hardware to accommodate more demanding technological needs, such as better battery life, reduced energy consumption, and advanced computing power. Some QQQ and QQQM companies are already driving change on these fronts. But for the time being, edge AI as an investment thesis is flying under the radar. That could soon change. And that could potentially bring with it positive implications for the Invesco ETFs.
“Moreover, a slate of new product releases as soon as Q1 2024, such as edge AI enabled smartphones with embedded custom silicon, should drive further investor interest in this theme over the coming 12 months,” concluded Stanley. “And we think smartphones stand the best chance of breaking the bottleneck soonest. They also have the largest total addressable market potential in the short and medium term. This is an uncrowded theme which we think is in pole position for 2024.”
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