Artificial intelligence (AI) is just scratching the surface of its long-term potential. And its intersections with automation and robotics only enhance the related investment thesis.
That puts added emphasis on selecting the right exchange traded funds with which to access the fast-evolving world of AI-related investments. On that note, the WisdomTree Artificial Intelligence and Innovation Fund (WTAI) is an idea to consider. WTAI, which follows the WisdomTree Artificial Intelligence & Innovation Index, is global, tapping into AI opportunities in the U.S. and beyond, including holding stocks from high-quality markets such as Taiwan, South Korea, and Japan.
Additionally, WTAI is home to 80 stocks, which is a fairly deep bench in this category. The fund doesn’t allocate more than 3% of its weight to any of its components, indicating that’s not overly reliant on a small number of names to drive returns.
WTAI Benefits From More Automation
WTAI’s methodology is potentially alluring to market participants because the fund reflects the broad opportunity set in the AI and automation spaces.
“It’s the ‘picks and shovels’ companies facilitating the new technology, whether that be the makers of the microchips or operators of the cloud computing facilities processing and storing the large amounts of data involved, that seem well placed to benefit,” according to Schroders.
From an investment perspective, AI is considered a technology-centric idea and WTAI reflects as much with a 77.63% weight to that sector. However, the case for the ETF is bolstered by the fact that AI usage cases span multiple industries and that related long-term spending is expected to be massive.
“Estimates on the potential benefits from technology vary widely. A McKinsey & Co report estimates that generative AI could add $2.6 trillion – $4.4 trillion annually to the global economy,” added Schroders. “PWC estimate the contribution to GDP at $15.7 trillion by 2030, which would be an equivalent boost to the global economy of up to 14%.”
Average out those forecasts and the resulting number is equivalent to multiple years of U.S. GDP. The point is AI is indeed innovative technology and some WTAI member firms, many of which have the balance sheets to support ongoing AI growth, will be leaders on this front.
“(AI-related tech firms) seem well set to benefit from automation trends, and are among a range of equities, which combined, can offer multi-asset investors an attractive mix of equity income and capital growth,” concluded Schroders.
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