October has a reputation for being a calamitous for stocks. And it’s been the month in which some of the worst market crashes on record were born. That doesn’t mean history will repeat this year. And roughly two weeks into the month, an earnest crash appears unlikely. Still, the Nasdaq-100 Index (NDX), which is half composed of tech stocks — including a slew of AI names — is usually more volatile in October than the other 11 months.
It’s possible NDX turbulence will again be above-average this year. But that could open to the door to opportunity with funds such as the the WisdomTree Artificial Intelligence and innovation Fund (WTAI).
Buoyed by a recent resurgence by the Magnificent Seven, WTAI is higher by 9.41% over the past month. That could be a sign October hasn’t cast its usual pall over stocks. Moreover, WTAI’s recent bullishness could augur well for broader AI sentiment into year-end and 2025.
Speaking of 2025 …
Analysts and investors are turning attention to how AI spending could shape up in the new year. Recently, there’s been concern AI adopters could spend lavishly on unproven concepts, drawing scrutiny in the investment company. However, some companies, including WTAI holdings Alphabet (GOOG) and Meta Platforms (META), recently noted there’s more risk in being AI cheap than overspending.
“Additional support from a range of customers like other cloud platforms, enterprises, and sovereign entities also underscores our positive outlook on AI semis. We expect overall AI semiconductor industry revenues to grow from USD 58bn in 2023 to USD 168bn by the end of this year and to USD 245bn by end-2025,” noted UBS Wealth Management.
AI-Led Tech Upgrade Cycle Coming?
Another catalyst could be forming for WTAI member firms, that being an AI-led tech upgrade cycle. The initial round of AI spending was led by demand for GPUs and the first generation of AI chips. Now, chipmakers, are forecasting AI-related expenditures spreading to other fronts.
“According to major chipmakers’ product development roadmaps, the stage is set for a leap in compute power over the next five years, leading to reduced transistor sizes,” added UBS. “Smaller sizes would allow more transistors in a [chip. That means] it can do more processing in the same amount of time. This should lead to significant performance improvements and result in elevated investments in AI chips. We also see select beneficiaries in the semicap equipment and data center supply chain segments.”
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