Communication services and technology were two of the best-performing sectors in 2024. Much of that bullishness was attributable to the artificial intelligence trade. More of the same could be in store this year amid forecasts calling for elevated AI spending.
That could be to the benefit of exchange traded funds such as the WisdomTree Artificial Intelligence and innovation Fund (WTAI ). This fund had an impressive showing in 2024. And the good times could continue into 2025 and beyond. Some experts believe this year will be the start of what could be a massive artificial intelligence spending mega cycle.
To date, much of AI-related spending has been steered toward enablers, namely semiconductor companies. WTAI has benefited from that trend as nearly 20 of the ETF’s 76 holdings are chip stocks. That implies the fund could benefit again this year as artificial intelligence expenditures soar. But the good news is WTAI is much more than a semiconductor ETF. It covers more AI bases, potentially positioning it to garner upside on multiple fronts this year.
Software Could Be 2025 AI Surprise
It wasn’t that long ago that cloud computing and cybersecurity software equities were the darlings of the tech universe. Artificial intelligence wrested that status from those groups. But AI also has deep intersections with those tech segments, indicating a software equity resurgence is possible this year. That could be helpful to WTAI because the ETF is home to several software names.
“Over time, the benefits of AI adoption may shift from semiconductors and hardware toward software providers, as adoption of generative AI moves past the infrastructure phase. This kind of shift would mirror trends that played out during the development of the internet several decades ago,” according to Fidelity.
The intersection of AI and cloud computing could prove compelling over the long-term. And that could be a catalyst for WTAI because the ETF holds several cloud computing names.
“Companies with cloud-based, AI-driven platforms for streamlining and automating routine tasks in enterprises and free, AI-enabled features exemplify this thesis. The software can provide contextually relevant support for a range of tasks including marketing, customer support, and back-office management,” added Fidelity.
Bottom line: WTAI’s diverse approach could position the ETF to be a leader as AI spending ramps up this year — something that’s arguably a certainty.
“There is already evidence of AI-driven gains in productivity, customer service, coding, graphic design, and translation services, and I believe AI could eventually be disruptive to the way most work is performed. Progress may not be linear, though, and investors must be mindful of stock valuations and the timing and potential impact of further technological advances in the field, as well as the broader macroeconomic environment,” concluded Fidelity.
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