Chief technology officers appear to share one thing in common when it comes to developing their IT budgets for the year — more artificial intelligence. This could add additional fuel to the already-hot AI theme and push AI-focused ETFs even higher.
Wealth management company Wedbush noted increased spending in AI for 2024, particularly when it comes to adding AI. In particular, AI spending will comprise about 8%-10% of IT budgets in 2024 compared to just 1% the year prior.
Additionally, that forecast corroborates with management consulting firm Gartner, which is projecting that spending on AI software on a global scale will hit $297 billion in just a few years. When it comes to spending, governments are expected to invest the most funds, with $70 million by the year 2027.
This all bodes well for traders looking to continue riding the AI momentum wave. They can continue doing so with funds like the Direxion Daily Robotics, Artificial Intelligence & Automation Index Bull 2X ETF (UBOT). The ETF seeks daily investment results that equal to 200% of the daily performance of the Indxx Global Robotics and Artificial Intelligence Thematic Index.
A Pairs Trade for Chips
Given Nvidia’s exponential growth, a suitable pairing for the AI theme has been semiconductors. With higher usage of AI comes the need for hardware to support AI applications, which is where chips can play a pivotal role. That said, Direxion has a pairs trade where traders can play both sides of the proverbial coin with semiconductors.
Traders can look at the Direxion Daily Semiconductor Bull 3X ETF (SOXL). It seeks daily investment results equal to 300% of the daily performance of the PHLX Semiconductor Sector Index. Alternatively, when semiconductors dip from profit-taking, market news, or other catalysts, there’s the Direxion Daily Semiconductor Bear 3X Shares (SOXS). Traders can offset their bullish positions with SOXS, giving them flexibility irrespective of whether the semiconductor industry trends up or down.
As seen in the chart below, UBOT is making a profound move higher, with an over 90% gain for the year. One commonality with both funds is they each have Nvidia in their holdings, which brings to mind a single-stock ETF solution for traders who want concentrated exposure to the AI chipmaker. Again, traders can play both bullishness and bearishness with the Direxion Daily NVDA Bull 2X Shares (NVDU)/Direxion Daily NVDA Bear 1X Shares (NVDD) pair.
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