Artificial intelligence (AI) is one of the premier disruptive technologies, but that status didn’t prevent some AI equities from sliding alongside other innovative growth fare in 2021.
However, it wasn’t an entirely lost year for AI investors, and with the potential for things to improve this year, the WisdomTree Artificial Intelligence and Innovation Fund (WTAI) could prove to be a well-timed addition to the AI exchange traded funds field. WTAI debuted last month.
The newly minted WTAI tracks the WisdomTree Artificial Intelligence & Innovation Index, which is a basket of companies dedicated to AI and related advancements and technologies. One thing investors should keep in mind when considering WTAI is that while AI is seasoned relative to other disruptive technologies, it’s still in its early innings, and the full opportunity set won’t be revealed overnight.
However, there’s no getting around the fact that more companies are awakening to the fact that they need AI on their sides, and they’re willing to spend to that effect. Retail is a prime example of that trend.
“Data suggests that the global retail sector is expected to spend $11.8 billion on AI in 2021, which would compare to an expectation of banks spending $11.7 billion,” says Christopher Gannatti, WisdomTree global head of research, in a recent note. “The notable development here is that banks would no longer be the biggest spenders. Spending in global retail related to AI is expected to grow at a compound annual rate of 25.5% between now and 2025.”
Another important element in the AI investing equation is how this technology interacts with other disruptive growth concepts. The intersections, which include healthcare innovation, retail, and financial services, are practically limitless. Electric vehicles — another high-growth industry — are another strong argument.
“The electric vehicle revolution is pushing more and more data into vehicles,” adds Gannatti. “While cars driving literally by themselves across global cities could be years away, the car as a collector of data is here already, and more and more new vehicles will be monitoring how humans drive in various ways, collecting data and ‘learning’ from patterns all the time.”
Overall, investors considering stakes in WTAI will need to exercise some patience because disruptive growth stocks could be pinched by rising rates this year. However, that shouldn’t obfuscate a compelling long-term outlook.
“Investors focused solely on 2022 may be in for a volatile ride, but investors focused on longer horizons could see interesting points of entry as long as they understand the megatrend should have staying power over many years, not just in 2022,” concludes Gannatti.
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