Investors in Nvidia (NVDA) have likely seen profitable returns this year, outperforming the S&P 500 stock market. Nonetheless, certain investors focusing on AI ETFs have identified two companies that have shown even more impressive performance.
Within the Global X Artificial Intelligence & Technology ETF (AIQ) with assets totaling $700 million, IonQ (IONQ) and incredibly small machine (SMCI) have seen their stock values surge by over 25% this year. This growth significantly surpasses the 18.5% increase in the S&P 500, attributed in part to their involvement in cutting-edge AI technologies like Chat GPT in 2023. Surprisingly, they have even outpaced Nvidia, a standout in the AI sector, with a 242% gain.
The surge in artificial intelligence-related stocks has been remarkable. Nicholas Colas of DataTrek Research noted that while many expected the market narrative in 2023 to revolve around the Federal Reserve, interest rates, and corporate earnings, “Gen AI did kind of save the property business.” So, how does one identify the winning investments?
Is Focus on AI ETFs Essential?
Some investors might consider a straightforward approach to AI investment by holding the Nasdaq 100 and an ETF such as the Invesco QQQ Trust.
Todd Rosenbluth, VettaFi’s head of research, pointed out that “Invesco QQQ provides exposure to numerous mega-cap companies known for their innovative AI advancements, including Amazon.com (AMZN), Microsoft (MSFT), and Nvidia. This could offer a convenient way to tap into the potential of AI.”
However, QQQ’s exposure extends beyond AI-centric firms. For those seeking more targeted exposure, Rosenbluth suggested looking into ETFs that prioritize AI revenue in their security selection process.
Selecting an AI Fund
Rosenbluth highlighted the International X Artificial Intelligence & Technology ETF as a popular choice among traders, showcasing robust performance this year. With investments in nearly 90 companies, this ETF has surged by over 47% and differs from QQQ by allocating only 3% to Microsoft, compared to QQQ’s over 10% exposure to the tech giant.
This ETF offers the necessary technology for AI data analysis and investments in companies poised to benefit from AI advancements. Similar investments can be found in companies like ServiceNow (NOW) and Adobe within AIQ, according to Rosenbluth.
Moreover, the ROBO Global Artificial Intelligence ETF, with assets totaling $100 million, focuses on companies involved in developing AI-enabling systems and networks, alongside those applying AI in various sectors. This ETF also deviates from the Nasdaq 100, holding stakes in companies like Alteryx (AYX), Cloudflare (NET), and Splunk (SPLK).
Buyers should also explore newer options like the Roundhill Generative AI ETF (CHAT), which includes international players like Baidu (BIDU) alongside established American companies like Microsoft and Nvidia.
AI ETFs: Just the Beginning
It’s important to recognize that the field of AI is continuously evolving. While Nvidia currently stands out, the landscape can swiftly change. Buyers must remain adaptable, with AI ETFs serving as valuable tools in navigating this dynamic market.
Zeno Mercer, a research scientist at VettaFi, emphasized that “we are witnessing the nascent stages of AI expansion, approaching the one-year anniversary of the Skype GPT release.” As more companies monetize consumer and industrial AI applications, further advancements are on the horizon.
Top-performing companies in the International X Artificial Intelligence & Technology ETF
| ETF | Ticker | Year-to-Date % Change |
|---|---|---|
| IonQ | IONQ | 256.2% |
| Incredibly Small Machine | SMCI | 253.0% |
| Nvidia | NVDA | 241.8% |
| Websites for Meta | META | 180.0% |
| Uber Technologies | UBER | 121.8% |
| Shopify | SHOP | 100.9% |
| Tesla | TSLA | 95.8% |
| Adobe | ADBE | 81.6% |
| Splunk | SPLK | 76.3% |
| ServiceNow | NOW | 72.1% |
