It almost goes without saying that artificial intelligence (AI) has been a hot ticket item for short-term traders to capitalize on in the 2024 rally, but with volatility forthcoming, it’s best to stay flexible.
The general consensus is that the long-term trend will benefit AI.
“AI is a moving target,” said Chris Caplice, the executive director of the MIT Center for Transportation and Logistics. “It’s not sitting still; it’s aspirational because what was considered AI 30 years ago — even 20 years ago — is not considered cutting-edge AI anymore. It’s always that thing that exceeds our grasp.”
However, the stock market is much more fickle when it comes to the short-term horizon. As such, in order to maintain flexibility, Direxion offers leveraged and inverse exchange traded funds (ETFs) that allow traders to remain tactical in fluctuating markets. With a forthcoming U.S. presidential election, flexibility will be imperative when volatility strikes.
When AI trends higher, consider the Direxion Daily AI and Big Data Bull 2X Shares (AIBU). It provides 200% exposure to the performance of the Solactive US AI & Big Data Index. It represents the securities of companies domiciled in the United States that have business operations in the field of AI applications and big data.
Under the hood of AIBU, traders will see some familiar names like Nvidia, Apple, and Microsoft. Arista Networks is another AIBU holding that may not have the household name recognition as the aforementioned “Magnificent Seven” names, but plays a crucial role in the AI industry with regard to data center and cloud-computing technology.
Trade the Other Direction
Despite the growth prospects, AI could falter if investors think the AI trade is losing its momentum. This is especially the case if economic data continues to suggest that the broad economy could take a turn for the worse, causing investors to exit from growth-fueled AI names.
“Investors began August falling off a cliff due to a combination of weak economic data, including higher unemployment and the unwinding of the carry trade when the Bank of Japan raised interest rates on the yen,” the Motley Fool confirmed. “Concerns that the AI boom could be fading also weighed on tech stocks.”
If the hype around AI starts to fade, at least in the short-term horizon, then traders can also use the Direxion Daily AI and Big Data Bear 2X Shares (AIBD). Having the ability to take the bearish side of the trade allows for flexibility in the markets regardless of whether the AI sub-sector is trending higher or lower.
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