One of the hottest areas for investors at the moment is artificial intelligence (AI). While the technology has existed in various capacities for decades, applications in areas such as cloud computing, workplace automation, and e-commerce have businesses moving quickly to integrate AI across their organizations.
If you’re an investor, odds are that you’ve been bombarded by headlines featuring the “Magnificent Seven” stocks — a moniker used to capture the biggest names in AI: Microsoft, Apple, Amazon, Alphabet, Nvidia, Meta Platforms, and Tesla.
While choosing among megacap tech stocks presents a good way to gain exposure to AI, some investors may prefer a more passive approach. Moreover, savvy investors understand that AI is being developed by many enterprises outside of the Magnificent Seven cohort.
The WisdomTree Artificial Intelligence and Innovation Fund (WTAI -1.98%) is an exchange-traded fund (ETF) that holds some of the most influential names in AI. Let’s dig into the fund and assess why it may be a good opportunity for investors seeking a passive approach to the hottest ticket on Wall Street.
Why is everyone so interested in artificial intelligence?
Forecasts surrounding the addressable market for AI have a wide range. Statista estimates that the AI market will grow at a compound annual growth rate of roughly 16% between 2024 and 2030 — resulting in a market of $738 billion. Meanwhile, Bloomberg reports that generative AI could reach a market size of $1.2 trillion by 2032.
What makes the WisdomTree Artificial Intelligence and Innovation Fund interesting is that it holds stocks in several different end markets — each of which is ripe to use AI to launch to new levels. For example, the ETF holds positions in companies that develop AI software for machine learning or natural language processing (NLP), semiconductors, and even AI-powered hardware applications in drones or self-driving vehicles.
Some of its largest holdings are Advanced Micro Devices, CrowdStrike, and Magnificent Seven members Meta Platforms, Microsoft, and Alphabet. A unique feature of the WisdomTree Artificial Intelligence and Innovation Fund is that even though the fund specifically focuses on AI, its holdings touch many different sectors, so that investors still achieve some level of diversification and risk mitigation.
The ETF also has positions in some stocks that have had a rough go in recent history. Gaming company Unity Software is a top position, a stock that is down roughly 20% in the past year. Additionally, semiconductor companies Qualcomm and Arm Holdings are both major positions. While each of these stocks has enjoyed a run-up in recent months, I suspect that this is due to enthusiasm surrounding AI and chips in general — as both companies are far smaller operations compared to that of Nvidia, and each is in the midst of a turnaround from an operating standpoint.
Is this WisdomTree Artificial Intelligence and Innovation Fund right for you?
One of the most important items to look at when choosing an index fund is the inception date. This will tell you how long the fund has been trading. It’s an important thing to consider because it can shed light on the fund’s performance over a multiyear period.
Given that the WisdomTree Artificial Intelligence and Innovation Fund has only been around since December 2021, there isn’t a ton of data to digest. Moreover, 2022 was an abysmal year for tech stocks in particular, while 2023 witnessed an outsize rebound — with the Nasdaq Composite surging over 40%.
This dynamic makes the returns for the WisdomTree Artificial Intelligence and Innovation Fund a little challenging to decipher. An important thing to keep in mind is that you don’t have to do anything after you buy shares of the fund. The fund’s managers change its holdings without requiring you to do any due diligence or research whatsoever.
This is where long-term thinking comes in handy. While use cases for AI are unfolding and the potential size of the market is ever-evolving, the consensus seems to be that AI will generate meaningful growth for at least the next several years. For this reason, funds that specialize in AI exposure could end up generating returns superior to that of the S&P 500 on a consistent basis.
An important caveat to note is that weightings for positions matter in ETFs. So while the WisdomTree Artificial Intelligence and Innovation Fund holds positions in several terrific businesses, the fund’s overall return since inception may be a bit muted due to the weightings of some of its larger holdings.
If you’re eyeing this ETF, also note that one of the most prudent strategies for investing in index funds is making a monthly contribution. Although it may not seem like much at the time of investment, consistent contributions can lead to generational wealth over a long-term time horizon thanks to the power of compounding.
I like that this fund offers investors exposure to smaller, perhaps overlooked AI developers and even explores options in companies that primarily operate overseas. However, while I understand that the ETF is clearly trying to build a portfolio that isn’t hyper-concentrated in just big tech, I think some of the fund’s positions in current market leaders need to be more of a prominent fixture.
I see the WisdomTree Artificial Intelligence and Innovation Fund as a lower-risk opportunity for investors looking to gain exposure to AI, but are overwhelmed by the process of choosing individual stocks. The robust secular outlook for AI and its ability to disrupt myriad markets could make investing in the space a lucrative option for investors with a long-term time horizon.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Apple, CrowdStrike, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, CrowdStrike, Meta Platforms, Microsoft, Nvidia, Qualcomm, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
