In no era of human history have business and technology been so inextricably linked as they are in the present times. The significance of this can be gauged from a recent report that outlines the six trending industries in 2022. All of these overlap with the technology space. The industries include space tech, bio tech, neuro tech, robot tech, climate tech, and energy tech. These trends were witnessed despite a broad macro slowdown at the market which favored value stocks as investors reevaluate their risk profiles in light of recession fears.
According to analysts, the tech industry remains a robust choice for business growth and career advancement in 2022. As per a recent report, the information technology market grew from $8,384.32 billion in 2021 to $9,358.51 billion in 2022 at a compound annual growth rate of 11.6%. This growth came despite the pandemic, the Russia Ukraine war, and economic uncertainties. Looking forward into 2023, these growth trends are likely to accelerate as the economy recovers from a tumultuous 2022.
Investors should monitor long-term trends in the tech space, like the optimizing of IT systems for greater reliability, maintaining the value integrity of production AI systems and scaling vertical offerings, as well as the accelerating strategies to tap new virtual markets. Digital immune systems, applied observability, AI trust, risk and security management, industry clouds platform, platform engineering, wireless value realization, super apps, adaptive AI, metaverse, and sustainable technology are all also sectors investors should keep a close eye on.
Some of the top stocks in the tech sector for the long term include Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB). Analysts have urged leading technology providers to play a top role in helping enterprises use innovative technologies to slide through the current storms of disruption. The use of tech as a safe haven in times of recession, especially in the services sector, is also likely to rise in the coming years.
The companies that have long-term growth catalysts and operate in the tech sector were selected for the list. Special importance was assigned to outlining the basic business fundamentals and analyst ratings for each firm to provide readers with some context so they can make more informed investment choices. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Best Tech Stocks For Long Term Investment
12. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) provides integrated solutions and services worldwide. On December 13, the firm announced that it had signed a deal with Rapidus to work on developing the breakthrough 2 nanometer node technology of the former for implementation in Japan by the latter. The US government plans to invest hundreds of billions in chip firms over the next few years to shore up chip manufacturing in the country. As the demand for electronics and electric vehicles rises, so will the demand for chips. IBM can jump on this growth curve by investments in the chip space.
On October 18, BofA analyst Wamsi Mohan maintained a Buy rating on International Business Machines Corporation (NYSE:IBM) stock and lowered the price target to $145 from $155, noting that it has been estimated that about 80% of the software portfolio is non-transactional contracts linked to mission-critical projects.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in International Business Machines Corporation (NYSE:IBM) with 4.3 million shares worth more than $515.8 million.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), International Business Machines Corporation (NYSE:IBM) is one of the best tech stocks for long term investment.
In its Q4 2021 investor letter, St. James Investment Company, an asset management firm, highlighted a few stocks and International Business Machines Corporation (NYSE:IBM) was one of them. Here is what the fund said:
“International Business Machines Corporation (NYSE:IBM) was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department in the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful IBM was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of time before an army of IBM salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (read more)
Intel Corporation (NASDAQ:INTC) designs, manufactures and sells computer products and technologies worldwide. On November 18, Intel revealed that it has introduced its real-time DeepFake detector, FakeCatcher. This Deep Fake detector analyzes the blood flow in the video pixels to return results in milliseconds with an accuracy of 96%. The product is just one example of the growth path that the firm has in different sectors, like video editing and news dissemination, as the demand for powerful chips rises. The company, one of the leading US-based plays in the semi space, is also a reliable dividend player for the long term.
On October 31, Citi analyst Christopher Danely maintained a Neutral rating on Intel Corporation (NASDAQ:INTC) stock and lowered the price target to $27 from $30, noting that the company reported mixed results and guided well below consensus driven by the PC downturn.
At the end of the third quarter of 2022, 69 hedge funds in the database of Insider Monkey held stakes worth $1.9 billion in Intel Corporation (NASDAQ:INTC), compared to 65 in the preceding quarter worth $2.5 billion.
In its Q3 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Intel Corporation (NASDAQ:INTC) was one of them. Here is what the fund said:
“Also on the detractor side, Intel Corporation (NASDAQ:INTC) delivered a disappointing revenue miss and lowered full-year revenue and earnings guidance as COVID-19-driven demand for PCs abated (where Intel enjoys half its sales) and a delay in its flagship Sapphire Rapids CPU hurt its data center business. Despite these issues, we still believe Intel is an economically sensitive turnaround story with substantial upside.”
Micron Technology, Inc. (NASDAQ:MU) designs, manufactures and sells memory and storage products worldwide. On December 5, Micron Technology revealed that its mobile memory chip, low-power double data rate 5X (LPDDR5X), is gaining market traction with the validation of its mobile memory for Qualcomm Technologies’ latest mobile platform for flagship smartphones. The smartphone market is one of the biggest businesses in the world. Billions of people own smartphones and are increasingly reliant on these machines for many basic tasks. Micron, whose chips power these phones, has a steady avenue of growth in the smartphone space for the long-term.
On October 7, Fargo analyst Aaron Rakers maintained an Overweight rating on Micron Technology, Inc. (NASDAQ:MU) stock and lowered the price target to $70 from $75, noting that it won’t be surprising to see shares trading lower ahead of the upcoming first-quarter earnings release.
At the end of the third quarter of 2022, 74 hedge funds in the database of Insider Monkey held stakes worth $2.5 billion in Micron Technology, Inc. (NASDAQ:MU), compared to 69 in the preceding quarter worth $2.2 billion.
In its Q2 2022 investor letter, Meridian Funds, an asset management firm, highlighted a few stocks and Micron Technology, Inc. (NASDAQ:MU) was one of them. Here is what the fund said:
“Micron Technology, Inc. (NASDAQ:MU) is a leader in the production of DRAM and NAND memory. We invested in the stock in the third quarter of 2019 during a cyclical downturn in the memory industry. Our rationale was that, while the memory industry is cyclical, we believed there are strong secular drivers in place that will lead to higher peaks and long-term growth. Our secular thesis is based on our conviction that the quest for ever-increasing compute speeds will increasingly rely on memory to solve bottlenecks and that increased memory content in nearly everything from mobile phones to automobiles will drive demand. Micron’s stock traded lower during the quarter due to macroeconomic concerns that led to lower earnings expectations. We increased our stake in the company, as we believe our secular thesis remains intact. We wanted to take advantage of what we view as temporary cyclical concerns that caused the stock to trade at less than 10x reasonable trough earnings per share (EPS) estimates and less than 7x recent peak EPS.”
Tesla, Inc. (NASDAQ:TSLA) designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems. On September 30, Tesla launched the prototype of its humanoid robot named Dubbed Optimus. This launch has set a mark on reshaping the future of physical work using artificial intelligence. The company said that the robot is running on its Self-Driving computer. Over the years, the firm has distinguished itself in the electric vehicle space through the use of cutting-edge software that competitors are often lacking. The foray into robotics underscores the innovation-driven values of the firm which have helped it build such a strong profile in the EV space.
On December 13, Goldman Sachs analyst Mark Delaney maintained a Buy rating on Tesla, Inc. (NASDAQ:TSLA) stock and lowered the price target to $235 from $305, noting that it is believed that if Tesla can demonstrate that its demand levers and the Inflation Reduction Act contribution can help drive strong growth and margins in the coming quarters, then an upside case could be visible for the stock to trade to about $300.
At the end of the third quarter of 2022, 88 hedge funds in the database of Insider Monkey held stakes worth $7.4 billion in Tesla, Inc. (NASDAQ:TSLA), compared to 73 in the preceding quarter worth $7.2 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Tesla, Inc. (NASDAQ:TSLA) was one of them. Here is what the fund said:
“In 2014, before we began to invest in Tesla (NASDAQ:TSLA), I called Roger to ask whether he thought Elon Musk’s electric car business would succeed. I did not believe that Roger, an owner of dealerships that sell cars powered by internal combustion engines (ICE) would likely have a favorable opinion of Tesla’s prospects. That was principally for two reasons:
First, automobile manufacturing and distribution is unusually complicated, capital intensive, and highly regulated, which makes profitability problematic;
second, cars with ICE motors require extensive annual maintenance, and dealer services revenues, not profits from automobile sales, are the most important contributor to profits of perpetual licensed ICE car dealerships.
Penske Automotive Group is principally an ICE car dealer. Since electric cars are powered by batteries and need little service, franchised dealerships are incented to sell ICE, not EV automobiles. Further, Roger had been a long-term director of General Motors. General Motors’ ICE automobile business would be disrupted if Tesla were successful. (click here to read more…)
NVIDIA Corporation (NASDAQ:NVDA) provides graphics, computing and networking solutions. On November 16, NVIDIA made a multi-year partnership with Microsoft to build a supercomputer powered by Microsoft Azure’s advanced supercomputing infrastructure. This would be one of the most powerful cloud-based artificial intelligence supercomputers in the world. NVIDIA chips are considered some of the most advanced across the world and are especially popular among gaming enthusiasts. This niche has helped the company establish a stable foundation which it is now using to expand into new spaces in the tech sector.
On December 12, Cowen analyst Matthew Ramsay maintained an Outperform rating on NVIDIA Corporation (NASDAQ:NVDA) stock and raised the price target to $220 from $200, noting that the company is believed to be the leader in accelerated computing, and maintains wide and deep technological moats.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in NVIDIA Corporation (NASDAQ:NVDA) with 19.3 million shares worth more than $2.3 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“At the company-specific level, there was a broad correction across the entire portfolio. While four of our holdings contributed to performance, the contribution to absolute returns was less than 100bps combined, as unfortunately none of them was large enough to move the needle. We had 16 investments detracting over 100bps each with NVIDIA (NASDAQ:NVDA), our second largest detractor, costing the Fund 254bps.
NVIDIA’s stock was hit even harder, down 44.4%, impacted by concerns over the health of the consumer, dramatic declines in crypto, and COVID-related lockdowns in China. Despite the sell-off and the increased near-term volatility in its gaming business, NVIDIA’s revenues grew 46% year-over-year with 48% operating margins, driven by continued strength in its data center business as companies across industries adopt AI and ML…(read more)
ServiceNow, Inc. (NYSE:NOW) provides enterprise cloud computing solutions that define, structure, consolidate, manage, and automate services for enterprises worldwide. On October 5, ServiceNow unveiled that it would acquire Era Software, an observability and log management innovator. The company said that customers will be able to gather actionable insights that deliver value across the business, within a single solution purpose-built for the era of digital business. The purchase highlights the growth momentum in the software industry that has showed it can handle macro pressures this year. As more businesses go digital, the firm can expect to grow significantly in the coming years.
On October 27, Truist analyst Joel Fishbein maintained a Buy rating on ServiceNow, Inc. (NYSE:NOW) stock and lowered the price target to $525 from $550, noting that the company reported a strong quarter of constant-currency growth, but currency headwinds continue to be a drag on the top line performance and are starting to impact the bottom line as well.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in ServiceNow, Inc. (NYSE:NOW) with 1.7 million shares worth more than $639.7 million.
In its Q2 2022 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and ServiceNow, Inc. (NYSE:NOW) was one of them. Here is what the fund said:
“ServiceNow, Inc. (NYSE:NOW) is an enterprise software company that helps its corporate customers integrate all of their various software products into a unified platform. Their products are a key element in driving the digital transformation nearly every large company is undergoing. At the recent JP Morgan investor day, CEO Jamie Dimon explained that while the company could reduce expenses if needed should the economy slow, their spending on digital transformation would continue as this spending was critical to the company managing costs and maximizing revenue over time. As an example of this type of spending, Dimon specifically pointed to ServiceNow, calling out that the company’s products now oversaw the single largest collection of JP Morgan data and highlighted that working with them had saved JP Morgan $50 million over the past few years. (click here to read more…)
Salesforce, Inc. (NYSE:CRM) provides customer relationship management technology that brings companies and customers together worldwide. On September 21, Salesforce revealed its real-time platform Genie, a hyper-scale real-time data platform that powers the entire Salesforce Customer 360 platform. With this platform, every company can turn data into customer magic, delivering seamless, highly personalized experiences across sales, service, marketing, and commerce. The revelation is the latest example of the leading cloud services provided by the firm to businesses across the world. The firm is firmly committed to a strategy focused on delivering growth while continuing to expand operating margins.
On December 5, Credit Suisse analyst Phil Winslow maintained an Outperform rating on Salesforce.com, inc. (NYSE:CRM) stock and lowered the price target to $225 from $250, noting that the company reported solid third-quarter results on the income statement.
At the end of the third quarter of 2022, 117 hedge funds in the database of Insider Monkey held stakes worth $8.2 billion in Salesforce, Inc. (NYSE:CRM), compared to 116 in the preceding quarter worth $7.9 billion.
Along with Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), Salesforce, Inc. (NYSE:CRM) is one of the best tech stocks for long term investment.
In its Q3 2022 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Salesforce, Inc. (NYSE:CRM) was one of them. Here is what the fund said:
“Salesforce, Inc. (NYSE:CRM) has become a dominant global player in sales, customer service, commerce and marketing software over the past 20 years. The company earns 80% gross margins and grows 20% organically. Plus, virtually all of its revenue is recurring. We see Salesforce as a great business that we’ve admired from afar for a long time. More recently, the organization has made some changes at the top that prompted us to take a closer look at the stock. New CEO Bret Taylor and CFO Amy Weaver are bringing a culture of financial discipline. We believe this renewed focus on profitability and capital return, combined with Salesforce’s strong underlying business characteristics, will yield strong results. The current valuation of 3.9x next year’s revenues represents a significant discount compared to publicly traded peers and recent private market values in the software space that have similar growth profiles. This discount is an opportunity to invest in a great business at a good value.”
PayPal Holdings, Inc. (NASDAQ:PYPL) operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. The firm has shown over the past few months that the free cash flows it generates are more than capable of withstanding recession pressures. This makes the stock ideal for long-term holding, as it has several avenues for growth in the digital space, which, when combined with recession resilience, make for a very balanced growth and value profile.
On December 12, Barclays analyst Ramsey El-Assal maintained an Overweight rating on PayPal Holdings, Inc. (NASDAQ:PYPL) stock and raised the price target to $108 from $100.
Among the hedge funds being tracked by Insider Monkey, Camas, Washington-based investment firm Fisher Asset Management is a leading shareholder in PayPal Holdings, Inc. (NASDAQ:PYPL) with 17.7 million shares worth more than $1.5 billion.
In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. (NASDAQ:PYPL) was one of them. Here is what the fund said:
“This quarter, we bought shares in PayPal (NASDAQ:PYPL), the payments platform. PayPal has been one of the more high-profile victims of the market’s brutal ruthlessness over the past few months, and the stock fell by over two-thirds between its peak in July to the beginning of March this year. As we progressed PayPal through the Mayar Checklist Process, we identified a business with a leadership position in a structurally growing market.
The company benefits from certain network effects and faces several competitive threats at the same time. As the business profited from the move to online retail during the pandemic, as well as from the stimulus cheques handed out in the US, the stock price soared to absurd levels. As so often happens, however, the market had overcorrected by February and this quarter was offering prospective shareholders prices that assumed essentially zero growth in the business. When life gives you irrational sellers, make lemonade!”
Apple Inc. (NASDAQ:AAPL) designs, manufactures and markets smartphones, personal computers, tablets, wearables, and accessories. Apple is one of the biggest companies in the world and has built a brand that billions of people around the world own and know about. The firm has been able to grow revenues even in a macro slowdown and has the confidence of legendary value investors like Warren Buffett. The large correction in the stock price due to recession fears has also made the risk/reward profile of the shares more balanced in the past few months, and as the market recovers, the shares seem primed for an upside. The firm has a forward PE ratio of around 21x and a return on capital employed of around 100%. The shares can return more than 10% to investors annually over the long-term. The history of the firm in the stock market backs these predictions.
On November 8, UBS analyst David Vogt maintained a Buy rating on Apple Inc. (NASDAQ:AAPL) stock and lowered the price target to $180 from $185, noting that due to COVID-related complications, delivery dates are seen extending beyond Black Friday, though the impact is still estimated to be in the low single digits.
At the end of the third quarter of 2022, 140 hedge funds in the database of Insider Monkey held stakes worth $144 billion in Apple Inc. (NASDAQ:AAPL), compared to 128 in the previous quarter worth $143 billion.
In its Q2 2022 investor letter, Alger Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple Inc.(NASDAQ:AAPL) is a leading technology provider in telecommunications. computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives extremely tight engagement with consumers and enterprises. The engagement is fostering the growing purchase of high-margin services like music, apps, and apple pay. Apple’s shares detracted from performance as management lowered its guidance for the second quarter due to headwinds from the war in Ukraine, adverse foreign currency shifts, and dampened consumer demand associated with the coronavirus in China. Additionally, many investors were concerned that lockdowns implemented to curtail the spread of COVID-19 would impact the production of apple products, however, the manufacturing facilities have resumed activity.”
Mastercard Incorporated (NYSE:MA) is a technology company that provides transaction processing and other payment-related products and services. On December 7, Marqeta, a card issuing platform, announced that it has integrated with Mastercard’s Track Instant Pay, a virtual card solution which enables instant payment of supplier invoices via machine learning and a straight-through process. The integration highlights the importance that the company places on innovation while continuing to maintain a solid business profile which has helped it pay a growing dividend to shareholders for the past eleven years.
On November 1, Mizuho analyst Dan Dolev maintained a Buy rating on Mastercard Incorporated (NYSE:MA) stock and lowered the price target to $380 from $385, noting that the 2022 estimates were raised but outer-year expectations were trimmed down.
At the end of the third quarter of 2022, 137 hedge funds in the database of Insider Monkey held stakes worth $13.9 billion in Mastercard Incorporated (NYSE:MA), compared to 137 in the previous quarter worth $14.99 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Mastercard Incorporated (NYSE:MA) was one of them. Here is what the fund said:
“The Fund’s holdings in the Payments and Information Services themes also contributed to relative performance. Within Payments, lower exposure to this lagging theme and outperformance of Mastercard Incorporated (NYSE:MA) added the most value. These global payment networks are viewed as safe havens during market downturns but are also benefiting from resilient payment volumes and a sharp rebound in international travel.”
Visa Inc. (NYSE:V) operates as a payments technology company worldwide. On October 20, Current, a leading US financial technology platform, announced that it has migrated to the Visa DPS Forward Platform, a digital issuer processing platform built with REST APIs and designed to integrate with modern, digital banking cores to create unique card programs and payment solutions, with seamless migration of over four million accounts. The migration underscores the relevance of the firm, one of the leading payments giants, to new businesses in an era marked with speculation around crypto and other digital assets. The firm is also a reliable dividend player with over fourteen years of history in the space.
On December 2, Wells Fargo analyst Donald Fandetti maintained an Overweight rating on Visa Inc. (NYSE:V) stock and raised the price target to $250 from $225, noting that it is believed that the company is becoming even more entrenched in the global money movement ecosystem with their new products, making it even more difficult to disintermediate them in any meaningful way.
At the end of the third quarter of 2022, 165 hedge funds in the database of Insider Monkey held stakes worth $22.5 billion in Visa Inc. (NYSE:V), compared to 166 in the preceding quarter worth $24 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Visa Inc. (NYSE:V) was one of them. Here is what the fund said:
“The Fund’s holdings in the Payments and Information Services themes also contributed to relative performance. Within Payments, lower exposure to this lagging theme and outperformance of Visa, Inc. (NYSE:V). These global payment networks are viewed as safe havens during market downturns but are also benefiting from resilient payment volumes and a sharp rebound in international travel.”
Microsoft Corporation (NASDAQ:MSFT) develops, licenses, and supports software, services, devices, and solutions worldwide. On December 12, Microsoft signed a ten-year commercial deal with the London Stock Exchange Group to migrate the exchange data platform into the cloud. As part of the deal, the tech company will enable the digital transformation of LSEG’s technology infrastructure and Refinitiv platforms onto the Microsoft Cloud and in exchange, it will acquire a 4% equity stake in the financial firm, which owns the London Stock Exchange.
On October 26, RBC Capital analyst Rishi Jaluria maintained an Outperform rating on Microsoft Corporation (NASDAQ:MSFT) stock and lowered the price target to $310 from $380, noting that several near-term headwinds are now expected to pressure operating margins in financial year 2023, which Microsoft management now expects to contract by a point.
At the end of the third quarter of 2022, 269 hedge funds in the database of Insider Monkey held stakes worth $61.2 billion in Microsoft Corporation (NASDAQ:MSFT), compared to 258 in the previous quarter worth $56 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ:MSFT) was one of them. Here is what the fund said:
“Shares of Microsoft Corporation (NASDAQ:MSFT), a leading global provider of software solutions, declined 16.6% in the quarter along with the broader software group as well as due to growing concerns of a potential macro-driven slowdown. This is despite the company posting strong quarterly financial results and successfully absorbing headwinds from the war in Ukraine. The company had 21% revenue growth, 23% operating income growth, and 35% growth in Microsoft Cloud (all year-over-year in constant currency), which now represents 47% of total revenues.
Ark Invest’s Cathie Wood said Wednesday said artificial intelligence is the most important catalyst in every corner of her disruptive innovation strategy. “Many people say data is the new gold as they were talking about the cloud and other movements in technology, I think that’s ever more true now with artificial intelligence,” Wood said on CNBC’s ” Squawk Box .” The widely followed investor said most of the companies in her portfolio have the so-called data advantage, which is the “secret sauce.” For example, ChatGPT, an AI-generated messaging platform, is able to produce convincing content because it’s scraping the entire history of the the internet and answering questions based on on that history, Wood said. “I think the key here is who has the proprietary data.” Wood said. “I think there’s going to be a lot of commoditization in in this industry, in the whole artificial intelligence movement.” In September, Ark Invest launched a new venture capital fund, targeting individual investors with a minimum investment of just $500. The actively managed Ark Venture Fund invests in 70% private firms and 30% public companies focused on technologically enabled innovation. Wood said one of the companies in the venture capital fund is private software firm MosaicML. Meanwhile, she said Exact Sciences , Ark’s flagship Innovation ETF ‘s third biggest holding, is also a leader in AI. “What an advantage it has in terms of data on cancer, thanks to its molecular diagnostic testing franchise, and thanks to its distribution around the world,” Wood said. In its base case, Ark believes Exact Sciences could compound at an average annual rate of 25%, reaching $140 by 2027. The stock traded around $67 apiece on Wednesday.
While the language bot ChatGPT has gone viral, a Watson-powered ETF is making nearly double the returns of the broader market.
The AI Powered Equity ETF is up 10.4% in 2023, whereas the Vanguard Total Stock Market Index is up 5.67%.
IBM’s Watson supercomputer helps balance the fund’s portfolio holdings.
The popular language bot ChatGPT has shown a humanlike ability to render articles, emails, and even dating-app messages. But if you ask it to generate a portfolio that can beat the market, it spits out boilerplate information and reminds you it doesn’t have access to live stock data.
Yet, the $102 million AI Powered Equity ETF (AIEQ), which launched in 2017, has been quietly fulfilling that request so far this year. Issued by ETF Managers Group in partnership with the fintech firm Equbot, the fund leans on IBM’s Watson supercomputer to balance its portfolio.
Still, as ETF.com highlighted, the former is actively managed, and thus more expensive than the benchmark fund, cutting into actual returns to investors. The AI-powered ETF charges 0.75%, whereas Vanguard’s costs 0.03%. Both funds include JPMorgan and UnitedHealth Group in their top-10 holdings.
Chris Natividad, the chief investment officer of Equbot, said the Watson-powered fund can look beyond standard market data and cull information from tweets and earnings calls, according to ETF.com.
“We’re focused on investment related data, looking at how these different types of signals impact security practices across different time horizons,” Natividad said, per ETF.com.
“The best days of the fund are still ahead of it,” he added. “And just as you’ll see ChatGPT’s responses change and evolve with time and data, so will our fund.”
Canadian defined-benefit pension plans collectively suffered their largest losses since the 2008 financial crisis in 2022, recording a median decline in assets of 10.3 per cent despite a partial recovery in the final months of the year, according to a survey from Royal Bank of Canada RY-T.
Pension assets suffered heavy losses in the first two quarters of 2022 before starting to recover in the back half of the year. In the final quarter, pension assets returned 3.8 per cent, as measured by the RBC Investor and Treasury Services All Plan Universe, which serves as a benchmark for performance.
Pension plan investors were battered by unusually volatile markets driven by high inflation and rapidly rising interest rates, as both stocks and bonds returned losses, instead of helping offset each other as has often been the case in past market downturns. And although plans earned positive returns to finish the year, they are facing many of the same pressures in 2023.
“In the next few months, plan sponsors will need to be attentive to risk factors such as the economic impact of the central banks’ actions, ongoing geopolitical tensions and ongoing efforts to contain the COVID virus outbreak in certain emerging markets,” Niki Zaphiratos, managing director for asset owners at RBC I&TS, said in a news release.
Canadian pension plans’ bond portfolios had median losses of 16.8 per cent in 2022 – the largest annual decline in more than 30 years – and also trailed the benchmark FTSE Canada Bond Index. The losses were driven by the drastic action central banks took to tame inflation by raising interest rates, with longer-duration bonds that are most sensitive to inflation accounting for some of the largest declines.
Yet for pension plans, there was a silver lining to rapid interest-rate increases, which caused future liabilities to fall. As a result, more pension plans finished 2022 in surplus, meaning their assets were greater than their liabilities. And higher yields from fixed-income securities could also give pension plan investment managers more options to reduce risk-taking in their portfolios over the coming year.
Stocks also suffered, rather than acting as a counterweight to falling bond prices. Foreign equities returned 9.7 per cent in the fourth quarter, but closed the year down 11.3 per cent, according to RBC I&TS. And Canadian equities returned 6.3 per cent in the final quarter of the year, bringing their annual loss to a comparatively modest 3.6 per cent. In general, value stocks performed better than higher-risk growth stocks in the quarter.
The last time pension assets declined so sharply was in 2008, when Canadian defined-benefit pension assets posted a median loss of 15.9 per cent.
Defined-benefit pension plans pay fixed benefits for as long as a beneficiary lives based on their contributions and years of service.