The buzz around artificial intelligence may resonate across industries, as investors attempt to identify the stock-market winners as generative AI takes off.
“It’s actually kind of startling how narrow the impact has been in terms” of investor enthusiasm building around just a few companies in the stock market, said Steven Wieting, chief economist and chief investment strategist at Citi Global Wealth, in a phone interview. “AI could have pretty profound effects throughout the economy.”
Investors have been piling into chip maker Nvidia Corp.’s stock, expecting the company will benefit from the development of generative AI. Shares of Nvidia
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Dispersion within tech tends to be wider than in many other industries, as a company with the best technology can wind up being “winner-takes-all,” according to Wieting.
Meanwhile, exchange-traded funds that focus on AI as an investment theme have recently jumped, outperforming the broad stock market on Thursday with sharp gains that extended into Friday afternoon.
See: AI-themed ETFs jump as Nvidia surges
Artificial intelligence is “incredibly powerful and has potential for impact across nearly every industry,” said Dave Mazza, chief strategy officer at Roundhill Investments, in a phone interview.
The Roundhill Generative AI & Technology ETF
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“Generative AI is the topic du jour,” said Mazza, after “it really came to bear with the introduction of OpenAI’s ChatGPT around November.” ChatGPT seems to be “a more intuitive search model or search engine,” he said, and yet that’s “just scratching the generative-AI surface.”
The technology could be used in creative industries, potentially augmenting what humans can do in the design of art, cars and buildings, according to Mazza. And in healthcare, generative AI may lead to more personalized treatment plans, he said.
Ivana Delevska, founder and chief investment officer of Spear, said in a phone interview that AI is an “important” thread running across the portfolio of her Spear Alpha ETF
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“We like cloud stocks as a way to get exposure to AI because you’re going to see massive amounts of data that need to be managed,” said Delevska. “Another area that we like is cybersecurity,” she said, because as artificial intelligence “becomes more prevalent you’re going to see cyber threats be AI-based.”
While Microsoft, Alphabet, Amazon.com Inc.
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The ETF is “very concentrated,” holding around 20 companies, she said, and it’s “very active.”
As for cyber companies, Delevska said she likes stocks such as CrowdStrike Holdings
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After last year’s stock-market carnage in the technology industry, semiconductors stocks have bounced back and other areas of tech may follow in the second half of this year or in 2024, according to Delevska.
Cybersecurity companies should provide “fertile ground” for investment opportunities along with semiconductor equipment manufacturers for chip makers like Nvidia, said Citi’s Wieting. AI is expected to create a “massive” source of demand for computing power, he said.
“It’s a macro-level disrupter, in my view,” Wieting said of AI. It can both replace and “augment a lot of human skills.”
Meanwhile, the tech-heavy Nasdaq Composite
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Nvidia was not held by the fund on Friday, based on data on Cathie Wood’s ARK Investment Management’s website. The ETF’s Tesla Inc
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AI’s “impact has been extraordinarily narrowly felt in equity markets,” so far touching just a few companies, said Wieting, but “a wider impact than just the initial build” should arise over time.
