Given its seemingly undaunted ascent to the $3 trillion market capitalization club, Nvidia (NVDA) is the stock that grabs the most artificial intelligence (AI) headlines. As a result, many investors looking to play AI via exchange traded funds often lean toward funds heavy on that one stock.
Thus far, that strategy has paid, but there are other opportunities among AI ETFs that could reward patient investors. Consider the WisdomTree Artificial Intelligence and Innovation Fund (WTAI ). Home to nearly $270 million in assets under management, WTAI turns three years old in December.
Yes, Nvidia is WTAI’s largest holing, but at a weight of just over 3%. That’s one sign the WisdomTree ETF takes a broader approach to the expansive AI ecosystem. On a related note, the WisdomTree Artificial Intelligence & Innovation Index – WTAI’s underlying index – was recently rebalanced. That reconfiguration could position WTAI to capitalize on a broader set of AI-related opportunities.
New Look Could Benefit WTAI Investors
To be sure, WTAI’s rebalancing act didn’t result in drastic changes. Nor did it result in the ETF taking on positions in highly speculative stocks. The ETF’s roster is still heavily allocated to established, quality companies. Beyond Nvidia, top 10 holdings include Meta Platforms (META), Alphabet (GOOG) and Broadcom (AVGO), among others.
Alone, that’s testament to WTAI’s ability to capture an expansive range of quality AI names, but the fund’s rebalance is notable because it includes a pivot toward what could represent the next round of important AI innovations.
“Other innovations have a greater probability of impacting these kinds of fundamentals over a shorter time horizon. While we never know anything about the future with certainty, we do not want a full portfolio of deeper technology plays where we cannot credibly build a case that they can bring much, if any, business value within the next two years,” wrote Christopher Gannatti, WisdomTree global head of research. “It is important to mix longer-term innovation time horizons (like commercially available quantum computing systems and fully personalized medicine) with shorter and more medium-term innovation time horizons (like AI models being run directly on smartphones and laptops).”
As Gannatti noted, WTAI’s top 10 holdings (and others) score well when evaluating their abilities to deliver AI tools. With Apple (AAPL), another WTAI member firm, promising to bolster its AI game, that scenario could improve.
AI and Smart Devices Intersect
Additionally, WTAI may benefit from the intersection of AI and smart devices, including phones and tablets. That intersection is still in its infancy, but could become more material later this year and into 2025.
“We think it is possible that people, through the second half of 2024 and into 2025, will get excited about the concept of ‘AI on devices’ and refresh their laptops and smartphones,” concluded Gannatti. “If we are correct in this thesis, an important step will be Apple’s WWDC event in June 2024, where we expect an array of AI announcements. While not yet confirmed, we are excited to see what AI functionality may be in the iPhone 16, expected to come out later in 2024.”
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