Exchange traded fund investors can explore some of the innovations in the technology space, capturing some growth opportunities in quickly developing areas like AI, Internet, Semiconductor, Cybersecurity, and more.
In the recent webcast, Capitalizing on Today’s Tech: Semiconductors, AI, Robo and Internet Funds, Mark Marex, Research & Development Specialist, Nasdaq Global Information Services, highlighted the outperformance of the Nasdaq and its technology-heavy focus. Meanwhile, Ben Jones, Research & Development Specialist, Nasdaq Global Information Services, also pointed out that among the strongest fund group categories, areas like the Internet, technology, and U.S. large-cap growth, which include a tech-heavy tilt, have also been among the strongest in the current markets.
Among the long-term trends in the technology industry, semiconductors continue to be a critical component that keeps the sector growing. Marex pointed to ongoing high demand for chips that will continue; including autonomous/electric vehicles/hybrids in the automobile industry, security/healthcare from the industrials side; smartphones, 5G and emerging market infrastructure to support the communications sector; TVs, gaming, peripherals among consumer electronics; servers and storage devices in data processing; the internet of things, and artificial intelligence and machine learning.
Something like the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX), which tracks the PHLX Semiconductor Sector Index, can help investors gain exposure to U.S.-traded securities of companies engaged in the semiconductor business.
Jones also underscored the continuing trends that support internet usage and growth. For example, internet use through mobile devices has surged in recent years with the proliferation of cheap mobile phones, especially in developing economies where a rising middle-income consumer gains greater access to the internet. In the U.S. alone, daily hours spent with digital media surged to 3.6 hours on mobile devices in 2018 from 0.3 hours back in 2008.
Internet usage also surged in the post-coronavirus pandemic environment, as many consumers were stuck at home. According to McKinsey & Co., many online and at-home solutions to regular activities will likely be adopted for the long-term due to the change brought on by Covid-19. For example, many shopping categories saw 10% or more growth in their online customer base during the pandemic, and consumers continue to shop online even when brick and mortar stores have opened,
Investors can look to something like the Invesco NASDAQ Internet ETF (PNQI) for targeted exposure on internet names. PNQI tries to reflect the performance of the NASDAQ Internet Index. The fund generally will invest at least 90% of its total assets in securities that comprise the underlying index. The underlying index is designed to track the performance of the largest and most liquid U.S.-listed companies engaged in Internet-related businesses that are listed on one of the three major U.S. stock exchanges.
Additionally, Jones highlighted the trends in robotics and artificial intelligence. The annual global installed base of industrial robots is expected to rise to 3.55 million by 2021, compared to 1.83 million back in 2016. Meanwhile, artificial intelligence will find support from drivers like inference systems including facial recognition, robotics, factory automation, autonomous driving, and surveillance; training systems; automotive including infotainment, ADAS, safety, autonomous driving; financial services including identity authentication, smart portfolio management; and healthcare including disease prevention and diagnosis.
As a way to capture this growth opportunity, investors can consider the First Trust Nasdaq Artificial Intelligence and Robotics ETF (NasdaqGM: ROBT), which follows the Nasdaq CTA Artificial Intelligence and Robotics Index. ROBT provides exposure to target companies engaged in the artificial intelligence and robotics segments of the technology, industrial, and other economic sectors. Components are classified as AI or robotics engagers, enablers, or enhancers, as determined by the Consumer Technology Association.
Financial advisors who are interested in learning more about tech innovations can watch the webcast here on demand.