Amid concerns about intensifying regulatory scrutiny, Apple (AAPL) and Microsoft (MSFT) abandoned board seats at generative AI leader OpenAI, the parent company of ChatGPT. That might sound alarming to novice investors. But prior to fretting too much, market participants should consider other factors.
Apple and Microsoft leaving the OpenAI board notwithstanding, large companies remain devoted AI backers. This signals that they see long-term merit in this disruptive technology. That’s noteworthy for investors considering ETFs like the WisdomTree Artificial Intelligence and innovation Fund (WTAI).
WTAI, which turns three years old in December, is home to many of the large- and mega-cap stocks investors most readily associate with AI. But the ETF offers diversification advantages in that it’s not excessively allocated to a small number of names. In fact, ARM Holdings (ARM) — the ETF’s largest holding — commands just 3.25% of the fund’s weight. Still, WTAI is levered to the theme of big-name corporations making big artificial intelligence investments.
AI Chip Deals Flourishing
WTAI is home to an array of semiconductor stocks — nine of its top 15 holdings hail from that industry. That’s pertinent to investors because the chip space is an epicenter of artificial intelligence investments.
On July 10, Advanced Micro Devices (AMD) said it’s shelling out $665 million to acquire Finnish AI startup Silo AI in another sign of the buyer’s efforts to better compete with rival Nvidia (NVDA). Both Nvidia and AMD are top 10 holdings in WTAI.
“Silo AI’s team of trusted AI experts and proven experience developing leadership AI models and solutions, including state-of-the-art LLMs built on AMD platforms, will further accelerate our AI strategy and advance the build-out and rapid implementation of AI solutions for our global customers,” said Vamsi Boppana, senior vice president of the artificial intelligence Group at AMD, said in a news release.
Enthusiasm Abounds for AI’s Long-Term Prospects
Keeping with the theme of AI chips, reports surfaced on July 12 that Japan’s SoftBank Group — the company that previously held a majority stake in ARM — acquired U.K.-based chipmaker Graphcore. Financial terms of that deal weren’t disclosed. But it’s worth noting Graphcore was also once viewed as a potential rival to Nvidia.
Neither Softbank nor Graphcore are WTAI holdings. But that transaction, coupled with AMD’s Silo AI purchase, are two examples that large tech companies and big-name investors remain enthusiastic about AI’s long-term prospects. And they’re willing to allocate capital to that effect. They have the capital to do that. For example, some WTAI holdings are among the most cash-rich U.S. companies.
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