In 2023, it’s fair to say that artificial intelligence (AI) is one of this year’s most captivating investment themes. Add to that, from the perspectives of adoption, applications, and investing, AI is still in its infancy. This indicates market participants will be hearing about it for years to come.
Positive as those factors are, they don’t imply “easy money” when it comes to AI investment success. Some market participants are already learning as much and that could be one reason why the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) have added $1.15 billion and $5.58 billion, respectively, in new assets this year.
QQQ and QQQM aren’t dedicated AI exchange traded funds. But with both ETFs tracking the Nasdaq-100 Index (NDX), they’re practical ideas for advisors and investors that want solid exposure to this emerging theme while eliminating the need to stock pick to that effect.
QQQ, QQQM Have AI Utility
There are plenty of dedicated AI ETFs on the market today. And it wouldn’t be surprising to see more competing products come to market in the coming years. Some of the existing members of that group are considered “good ETFs.” And they’re legitimate options for tactical investors.
On the other hand, QQQ and QQQM are sound ways for accessing AI for many investors. That’s particularly true of QQQM. It is five basis points less expensive than its stablemate, making it ideal for cost-conscious, long-term investors.
“It’s hard to pick winners or get the timing right for any new technology. So diversification may offer broad exposure to AI as a theme with less individual company risk. In general, look for AI stocks that provide critical components (hardware and software) and those that use AI to improve products or gain a strategic edge,” noted Jeffrey Kleintop of Charles Schwab.
QQQ and QQQM offer another AI-related benefit. These ETFs’ holdings are credibly involved with AI. And, in some cases, are overt leaders in this young industry. That’s relevant because QQQ and QQQM holdings, broadly speaking, are widely followed by sell-side analysts and the buy-side community, meaning that when these firms make AI claims, those claims need to be backed up.
Those are points to consider. Recent history suggests some dubious firms will take advantage of investors’ enthusiasm for young growth industries.
“Long Island Iced Tea Corporation even changed its name to Long Blockchain Corporation. Even though the company had no actual business tied to blockchain at the time and no experience in the cryptocurrency space, its Nasdaq-listed share price skyrocketed and trading volume spiked. The stock hit an intraday high of $9.49 in December 2017 only to fall below $0.09 a share within a year,” concluded Kleintop.
Nasdaq ultimately delisted that stock.
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