VettaFi Voices On: Investing in Artificial Intelligence

With the VettaFi Artificial Intelligence symposium coming up next week, it seems logical for the VettaFi Voices to tackle the topic. Is AI going to be a major part of our lives going forward? Is it worthy of being classified as a megatrend? What are the best ways to access it as an investment? What are investors overlooking about AI as an investment theme?

Roxanna Islam Swan, associate director of research: I think AI is definitely worthy of being considered a megatrend. When you’re looking at megatrend investing or thematic investing, I think there’s often a lot of hype and talk about growth. Some of that is justified and some is overblown.

Investors should ask themselves a few questions including: Is this just hype (i.e., is this a short term trend driven by excitement in stock prices) or is there a real use case? Are there or will there be enough players in this area to make the idea investable as a theme or is it more appropriate to support a couple of stocks?

For the first question — yes, there’s a lot of use cases out there. AI is basically programming intelligence that mimics human intelligence. And almost everything we do revolves around technology so in a sense could potentially have AI involved. When we turn on our phones and computers we get personalized recommendations for shopping and search engine suggestions. A lot of newer cars have self-driving features where they can read speed limit signs and accelerate and brake when appropriate. I went on a 12-hour road trip in my new car a few weeks ago and barely had to do anything! These are all just personal uses cases. But those multiply when you think about industrial use cases and how AI affects the way businesses work.

Getting Exposure To Artificial Intelligence

And for the second question — you can get exposure to AI using megacap stocks like Alphabet, Amazon, Microsoft, Nvidia, etc. However, that applies to almost every disruptive tech theme. You also have more specifically focused AI companies out there like (AI) and Palantir Technologies (PLTR). There is an investable universe out there. I think a lot of investors do have a favorite stock or two.

A lot of investors may recognize that AI is an important theme, but it’s difficult to pick stocks especially since it’s a relatively newer industry, which can mean: 1) stocks are not all well-known and can be difficult to research, 2) few significant players with no clear market leaders, and 3) too many new entrants and/or fast exits to keep up with. That’s when it’s easier to look at an ETF.

And that could be a broader AI ETF like ROBO Global Artificial Intelligence ETF (THNQ) or the Global X Artificial Intelligence & Technology ETF (AIQ). Or it could also be one of the ETFs more focused on AI and robotics (not always the same thing) like the IRBO or the First Trust Nasdaq Artificial Intelligence & Robotics ETF (ROBT). Or maybe even an EV/autonomous vehicle ETF like the First Trust S-Network Future Vehicles & Technology ETF (CARZ), the iShares Self-driving EV & Tech ETF (IDRV) or the Global X Autonomous & Electric Vehicles ETF (DRIV).