Artificial intelligence is more than just a buzz-phrase, and that’s good news for investors — because concepts such as generative AI are taking off in a big way this year.
In what’s being dubbed an “iPhone moment,” generative AI is making seemingly daily appearances in traditional and financial media, putting the spotlight on related equities and exchange traded funds such as the ARK Autonomous Technology & Robotics ETF (ARKQ ).
Enthusiasm for AI ETFs is palpable. Not only is ARKQ up nearly 17% year-to-date, but the ARK fund has the goods to provide investors with exposure to generative AI.
“What is generative AI? It’s an area of artificial intelligence that centers on creating novel and distinct datasets such as images, videos, text, and audio across multiple domains by using multimodal large language models trained on diverse inputs,” noted Morningstar analyst Sabeeh Ashhar.
OpenAI’s ChatGPT — which Microsoft (MSFT) is an investor in — Google (GOOG)‘s Bard, Baidu (BIDU)’s Ernie Bot, and Salesforce (CRM)’s Einstein GPT are among the increasingly familiar and potent iterations of day-to-day generative AI utility. Google parent Alphabet accounts for 2.16% of the ARKQ portfolio.
Adding to the allure of ARKQ’s generative AI exposure is growth. It’s a simple concept. By some estimates generative AI could be a roughly $43 billion market this year, but it could more than double to more than $98 billion by 2026. It’s no wonder that so many companies are rushing to stake claims in the generative AI space, eyeing arenas such as automation, content development, generative design and more.
As it pertains to generative AI, automation “centers on the development of decision-making systems and workflow optimization. For instance, Tesla (TSLA) is using algorithms in combination with sensors, cameras, and synthetic data to actively pursue self-driving technology. And Salesforce is incorporating this innovative technology to improve customer relationship management and streamline user workflows,” added Ashhar.
That’s pertinent to ARKQ investors because Elon Musk’s Tesla is the ETF’s largest holding at a weight of 13.45%. Platforms and solutions, which is another area expected to be fertile territory for generative AI, is supported by companies such as Nvidia (NVDA). That semiconductor maker is ARKQ’s tenth-largest component, commanding 3.45% of the ETF’s roster.
“The theme centers on building platforms, interfaces, and solutions that other businesses can use to create their own applications and products, promoting widespread adoption across businesses of all sizes. Notable players in this theme include Alphabet, Microsoft, and Nvidia NVDA, as they develop language models and related solutions. Darktrace DRKTF is also included in this theme, as it works toward building threat-prevention solutions that enable fair usage of Generative AI,” concluded Ashhar.
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