Some semiconductor stocks with leverage to artificial intelligence slumped Tuesday amid fears of intensifying competition. Another factor tied to the slump was speculation that some big-name clients may dial back spending on gear.
However, there’s a silver lining for exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). Both of these funds are heavy on artificial intelligence equities, including chip names. The AI trade rapidly morphed from hype to an emphasis on tangible results. So it’s understandable that market participants might become jittery about spending headlines.
On the other hand, data indicates companies derive significant benefit from AI, and that being tight-fisted regarding those expenditures could prove counterproductive. A new Ernst & Young survey indicated that 97% of organizations that spend on artificial intelligence see some return on investment. However, those those returns aren’t uniform. That’s could be a long-term positive for QQQ/QQQM artificial intelligence holdings.
Compelling Case for AI Spending
AI spending benefits differ from one firm to the next. But there appears to be some correlation between higher levels of spending and increased ROI. And that could be a selling point for some QQQ/QQQM components.
“The survey finds senior business leaders at organizations that commit 5% or more of their total budget toward AI investments continue to see higher rates of positive returns than those spending less than 5%. And their returns are on the rise compared with six months ago,” noted Ernst & Young.
The survey indicates technology executives that allocated 5% or more of their budgets to AI generated increased ROI in areas including cybersecurity, employee productivity, operational efficiencies and product innovation, among others.
In what could represent another growth frontier for some QQQ/QQQM member firms, is the data issue regarding AI. Currently, data remains a hurdle to AI adoption and deployment at some organizations, That indicates that as that problem is solved, AI adoption and spending could increase.
“Despite the positive gains, companies’ data infrastructure is becoming a bottleneck. 83% of senior business leaders said their organization’s AI adoption would be faster if they had stronger data infrastructure in place, and two-thirds (67%) admit their lack of infrastructure is actively holding back AI adoption,” added Ernst & Young.
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