AI Revolution: Broadening Out Beyond Big Tech? 7/31/23
Jul 31, 2023
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Rich Lee and Todd Rosenbluth discuss the AI revolution and the potential for broader exposure in ETFs. They explore the profitability of owning AI ETFs and the impact of AI in various industries such as industrial automation, agriculture, and finance. The speakers also discuss momentum in ETFs, the trend of inflows into active management, and the growing popularity of thematic strategies in the ETF space.
AI-focused ETFs offer market-cap or equal-weighted diversification beyond big-cap tech companies like Nvidia, Meta, and Alphabet.
There is potential for more concentrated, actively managed AI ETFs that can offer alternative investment approaches, potentially generating differentiated returns.
Deep dives
AI ETFs with Familiar Names and Diversification
The podcast discusses AI-focused ETFs, such as the Global X Artificial Intelligence Technology ETF (AIQ), which include familiar names like Nvidia, Meta, Tesla, and Microsoft. These ETFs offer market-cap or equal-weighted diversification, providing exposure to a range of companies. With over 85 to 155 names and global exposure, these ETFs go beyond the commonly associated AI companies and offer broader coverage.
Different Ways to Play the AI Revolution
The podcast explores various ways to invest in the AI revolution beyond ETFs with familiar names. For instance, the discussion highlights the Roundhill CHAT ETF, an actively managed fund that concentrates on 25 to 50 companies involved in generative AI and related technology. This highlights the potential of more concentrated, actively managed AI ETFs that can offer alternative investment approaches, potentially generating differentiated returns.
AI's Impact Beyond Tech Companies
The podcast emphasizes that AI's impact extends beyond traditional tech companies. Industries like industrial automation, finance, agriculture, and consumer sectors are expected to benefit from AI as it enhances productivity, efficiency, and profitability. Companies like Ingersoll Rand and Eaton exemplify how industrial automation can lead to outperformance. The discussion highlights the growing recognition that AI will have a broader impact on the economy, not limited to technology stocks.
CNBC’s Bob Pisani spoke with Rich Lee, Head of Program Trading, ETF Trading and Execution Strategy at Baird – along with Todd Rosenbluth, Head of Research at VettaFi.With the AI revolution taking the world by storm, the bulls are hoping we’ll finally see the trend broaden out beyond just big-cap tech companies like Nvidia, Meta and Alphabet. And while there are a handful of ETFs heavily tied to AI out there, many ETF investors are hoping for a more all-encompassing, varied selection in the not-too-distant future. In the “Markets 102” portion, Bob continued the conversation with Todd Rosenbluth from VettaFi.
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