The magnificent seven stocks and their headlines are ever-popular. Given that, it’s easy for investors to focus on the short-term component of the artificial intelligence (AI) investment thesis.
However, approaching disruptive technologies with a long-term perspective can help smooth out some of the related volatility, indicating that exchange traded funds, including the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ), are credible ideas for investors looking to tap into the longer-ranging potency of AI and automation.
The ability of QQQ and QQQM to deliver AI/automation leverage is confirmed by the fact that the ETFs, which track the same index, are higher by 35.4% over the past 24 months – an advantage of 1,080 basis points over the S&P 500.
QQQ, QQQM Breadth Important
As long-term plays on AI and automation, QQQ and QQQM offer advantages, including exposure to both AI enablers and adopters. To date, enablers have driven the bulk of AI-related equity gains. However, market observers believe adopters will eventually have their days in the sun.
Additionally, observers expect AI and automation adoption to accelerate in the years ahead. Millions of baby boomers will leave the workforce. Crimped labor pools will therefore force employers to plug those gaps with technology.
“It’s the ‘picks and shovels’ companies facilitating the new technology, whether that be the makers of the microchips or operators of the cloud computing facilities processing and storing the large amounts of data involved, that seem well placed to benefit,” noted Schroders.
Perhaps as many two-thirds of global workers are expected to be exposed to AI and automation in the years ahead. There’s a wide field of industry-level adoption cases for these technologies, which could be accretive to QQQ and QQQM. For now, market participants appear focused on AI and automation as tech-centric concepts. The Invesco ETFs are up to that task as the funds allocate nearly half their weights to the technology sector.
“That said, the technology sector is home to some of the most profitable and cashflow generative in the world today,” added Schroders. “They seem well set to benefit from automation trends, and are among a range of equities, which combined, can offer multi-asset investors an attractive mix of equity income and capital growth.”
The quality purview of many AI-related large- and mega-cap companies, including an assortment residing in QQQ and QQQM, can limit some of the volatility associated with investing disruptive technologies.
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