Global X says there are three big things happening in global markets as AI continues to develop
\nInvestors still underestimating companies involved in AI including so-called Magnificient 7
\nGlobal X says investors should aim to get exposure to hardware, enabler and adopter side of AI<\/p>\n
Artificial intelligence (AI) is not just a fad term or trend but a structural shift in society and is impacting global equity markets in three main ways, according to Global X ETFs. <\/a><\/p>\n Investment strategist Billy Leung is new to Global X but has extensive expertise in tech companies and trends.<\/p>\n Leung has been monitoring tech stocks since the early 2000s through roles as a sell-side analyst and in high-frequency trading.<\/p>\n \u201cInvestors need to appreciate there are three big things happening in global markets right now as AI continues to develop and gain traction,\u201d Leung told Stockhead.<\/em><\/p>\n \u00a0<\/p>\n Leung says one data point he always gives investors and clients is that chip computing rates have increased about 10 times in the past 10 years.<\/p>\n \u201cMeanwhile, the costs of chips have gone down about 16 times,\u201d he says.<\/p>\n \u201cMore powerful and affordable chips is one of the key reasons why there has been such a strong improvement in developing AI in the past decade.\u201d<\/p>\n \u00a0<\/p>\n Leung says investors are still underestimating the companies involved in AI including the so-called Magnificent 7 \u2014 Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla.<\/p>\n He says the fallout from the dot.com bubble<\/a> more than 20 years ago continues to linger.<\/p>\n \u201cThere\u2019s still a lot of bad taste and people still think tech companies are very reckless and bad financially,\u201d he says.<\/p>\n \u201cBut when you really dig into the tech companies right now over 80% of the Nasdaq 100 companies are profitable.\u201d<\/p>\n Recent research by Leung found the Nasdaq 100 were actually more financially strong than the S&P 100.<\/p>\n \u00a0<\/p>\n Leung says investors know the likes of the Magnificent 7 and chip-maker Nvidia, which has become a bellwether for AI stocks.<\/p>\n Nvidia\u2019s shared rose 239% in 2023 and is up more than 96% YTD. With a market cap of ~US$2.33t Nvidia has grown to become one of the world\u2019s biggest companies.<\/p>\n However, beyond Nvidia Leung says there needs to be an appreciation of how deep AI goes.<\/p>\n \u201cIf you look at the hardware driving artificial intelligence for example Nvidia that is only one small part of the story,\u201d he says.<\/p>\n \u201cThere are companies which make different types of chips like maybe memory chips, and these can go from Korean to maybe US names such as Micron.<\/p>\n \u201cThere\u2019s also companies making different types of equipment that manufacture these types of chips.\u201d<\/p>\n He says if you look at the semiconductor production equipment space there are 15 sub-segments that are all driven by AI demand.<\/p>\n \u201cEach of these is becoming very popular,\u201d he says.<\/p>\n \u201cTen to 15 years ago, the semiconductor space was primarily reserved for industry specialists and a small group of specialised investors.<\/p>\n \u201cHowever, AI has accelerated growth, driving new developments and attracting broader market interest.\u201d<\/p>\n Leung says we haven\u2019t yet seen the potential of AI in terms of creating new products and services.<\/p>\n \u201cThe analogy I always use is if there was no Intel, no chip, no HP, no PC then there would be no Microsoft,\u201d he says.<\/p>\n \u00a0<\/p>\n Leung says looking back at the PC or internet era, these huge paradigm shifts don\u2019t go away but the focus will shift in line with different types of development.<\/p>\n \u201cAI is going to be around but what we hear about and the headlines are going to be constantly shifting with the overarching theme always being artificial intelligence,\u201d Leung says.<\/p>\n \u201cI think over the next two to three years we will see the semiconductor space really showing itself.<\/p>\n \u201cNo one gives enough weight on how much semiconductors do for AI and there\u2019s a big pocket of semiconductor space.\u201d Leung says when investing during times of great technological change like with AI it\u2019s good to get exposure to the three segments that will drive innovative change. \u201cDuring PC we saw Intel creating great chips, so these are the companies making hardware allowing advancement in development,\u201d Leung says.<\/p>\n \u201cWe\u2019ve seen Nvidia be strong with chips but there\u2019s a long list of hardware companies such as SK Hynix, which makes memory chips and Qualcomm making specialised chips for laptops for example.\u201d<\/p>\n \u00a0<\/p>\n \u201cEnablers build the platform for the technology to actually expand on, so that was HP building the PC during the Microsoft era,\u201d Leung says.<\/p>\n \u201cIn the infrastructure or enabler side we also have cloud and data management companies like Oracle, Cisco, even IBM.\u201d<\/p>\n \u00a0<\/p>\n \u201cThese are the companies leveraging the chips or platform and building the incredible new service or product like Microsoft,\u201d Leung says.<\/p>\n \u201cThere are some household names like Meta or Netflix but there are also lesser-known names such as ServiceNow and Salesforce who are applying AI to increase their margins and services.<\/p>\n \u201cIf you look at the margins in the last quarter for all these tech companies it\u2019s the margins that have been driving this new scalability for companies.\u201d Leung says investors should work to gain exposure to hardware, enabler and adopter side of artificial intelligence, for which ETFs can often provide.<\/p>\n \u201cYou need to buy a basket of names,\u201d he says.<\/p>\n Leung says the Global X Artificial Intelligence ETF (ASX:GXAI) is composed of two strong segments of companies.<\/p>\n He says the selection criteria for GXAI is companies which apply AI to their services or are developing AI, or are developing hardware supporting AI infrastructure.<\/p>\n \u201cThis ETF is exactly what we have been discussing and tries to capture that breadth and depth of artificial intelligence.\u201d<\/p>\n The ETF provider also offers exposure to the AI space through the Global X Semiconductor ETF (ASX:SEMI)<\/strong><\/a> and Global X Fang+ ETF (ASX:FANG)<\/strong><\/a><\/p>\n Betashares says its main ET offering exposure to AI is the BetaShares Global Robotics and Artificial Intelligence ETF (ASX:RBTZ).<\/strong><\/a><\/p>\n A spokesperson for ETF provider VanEck says its two biggest ETFs, the VanEck MSCI International Quality ETF (ASX:QUAL)<\/strong><\/a> and VanEck Morningstar Wide Moat ETF (ASX:MOAT),<\/strong><\/a> offer exposure to AI.<\/p>\n QUAL includes Nvidia, Microsoft, Alphabet, Meta, Adobe, ASML, Texas Instruments, Broadcom, Qualcomm and Cisco.<\/p>\n MOAT includes Alphabet, Amazon, Microsoft, Salesforce and Adobe.<\/p>\n The spokesperson says the VanEck MSCI International Value ETF (ASX:VLUE)<\/strong><\/a> \u00a0offers exposure to Cisco, Intel, IBM and Qualcomm.<\/p>\n The VanEck MSCI Multifactor Emerging Markets Equity ETF (ASX:EMKT)<\/strong><\/a> offers exposure to Taiwan Semiconductor Manufacturing Co (TSMC), Samsung, Advanced Micro Devices (AMD) and Alibaba.<\/p>\n \u00a0<\/p>\n \ufeff<\/span>\ufeff<\/span><\/span><\/span> The post Why Global X reckons AI is here to stay and its three main impacts on global markets<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"1.Rapid advancement in technology in past decade<\/h2>\n
2. Underestimating big AI companies<\/h2>\n
3. Huge breadth and depth of AI<\/h2>\n
Artificial intelligence here for long-haul<\/h2>\n
\n\u00a0<\/p>\nThree segments to remember when investing in AI<\/h2>\n
\n\u00a0<\/p>\n1. Hardware<\/h2>\n
2. Enablers<\/h2>\n
3. Adopters<\/h2>\n
\n\u00a0<\/p>\nETFs offer exposure to three segments<\/h2>\n
The GXAI, SEMI, FANG, RBTZ, QUAL,MOAT, VLUE & EMKT share price today:<\/h2>\n\n
\n\u00a0
\nThe views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.<\/em>
\n<\/span><\/p>\n