New York, NY – In a shift reminiscent of the dot-com bubble, investor focus in 2024 has pivoted to artificial intelligence (AI), marking it as the year's most sought-after investment trend.
"We believe the AI trend will broaden in scope to encompass additional segments of the market, with new technological advancements, a more stable interest rate environment, and the ongoing impact of fiscal stimulus broadening innovation across multiple industries," said Rene Reyna, head of thematic and specialty product strategy at Invesco.
The enthusiasm for AI mirrors the dot-com era's fervor, with companies eagerly embracing and promoting AI. This is particularly evident among the large-cap companies in the S&P 500 index.
A report by financial data provider FactSet revealed that from March 15 to May 23 this year, 199 S&P 500 companies mentioned "AI" during their earnings calls. Standout mentions came from Meta Platforms Inc. (META), Nvidia Corp. (NVDA), and Microsoft Corp. (MSFT), which referred to AI 95, 86, and 74 times, respectively. The technology sector was particularly notable, with 90% of reporting companies citing AI in some capacity.
The discussions varied in focus. For instance, Microsoft's earnings calls highlighted cloud revenue growth through its Azure segment, AI assistants like Copilot, investments in OpenAI, licensing of various large language models as a service, and generative AI applications for LinkedIn content.
Retail investors keen on capitalizing on AI's growth need not manually analyze hundreds of earnings calls to identify AI involvement. Thematic exchange-traded funds (ETFs) that focus on AI stocks offer a convenient alternative. These ETFs, traded like stocks, hold a diversified basket of AI-related investments, managed according to an AI index or specific criteria, albeit with an annual expense ratio.
"We're in the early stages of the AI cycle, and proper diversification is extremely important – be it across company stages or geographies – because it's difficult to pick a winner or two this early," noted Tejas Dessai, assistant vice president and research analyst at Global X ETFs. "With a thematic ETF, you're following an idea as opposed to a complex strategy."
As AI continues to revolutionize various sectors, the investment landscape is adapting swiftly, offering new opportunities and challenges for both seasoned and novice investors.
