Back to top

Image: Bigstock

3 Factors Why AI Boom Is Here to Stay: ETFs in Focus

Read MoreHide Full Article

Undoubtedly, 2023 can be marked as the defining year of artificial intelligence (AI). This year’s stock market rally has been powered by an AI euphoria and better-than-expected corporate earnings. According to Dan Ives of Wedbush Securities, we are now at the cusp of the fourth industrial revolution, powered by generative AI, as quoted on CNBC. Per Ives, this moment is quite similar to the beginning of the Internet era in 1995, a revolutionary shift meant to reshape the technology sector for the next 20-30 years.

Big Tech Players Jump Into AI

Despite the pessimism of many bears, Ives strongly believes that we are at the beginning of a new tech bull market. The success of OpenAI's viral chatbot confirms this. The U.S. chipmaker Nvidia has played a massive role in this AI revolution. Their graphics chips regulate the technology behind AI aces like ChatGPT and Alphabet’s Bard chatbots.

Nvidia's impressive performance, with sales expectations of about $11 billion in the second quarter—significantly higher than Wall Street’s $7.15 billion estimate — indicates the high growth potential in this sector. Nvidia's astounding guidance and havoc first-quarter profit of over $2 billion have left investors and analysts speechless.

It's not just Nvidia that has benefited from this surge. Other companies, such as, a developer of AI applications for businesses, have also seen significant growth.

AI Uptake: A Trillion-Dollar Opportunity?

Ives predicts that there will be a trillion dollars of additional spend over the next decade in the AI sector. It’s a tectonic shift like the emergence of the Internet in 1995 and the launch of the Apple iPhone in 2007. Analysts estimate a $12 billion opportunity in AI, as quoted on CNBC. AI has persistently flooded every sector of the society. From healthcare to transportation, entertainment to cybersecurity, AI has left its presence in every industry.

Flurry of Big & Small Deals

The AI market is thriving with deals and partnerships. Nvidia itself has been entering into numerous partnerships in the AI space. The companies that are collaborating with Nvidia are Amazon, Adobe, Google Cloud, Microsoft, Snowflake and AT&T. About $1.7 billion was raised out of 46 deals in Q1 of 2023, according to PitchBook data.

An AI model startup founded by former researchers from Alphabet's DeepMind, Reka recently raised $50 million in a round of funding from investors, including DST Global Partners and Snowflake. Databricks has agreed to acquire generative artificial intelligence startup MosaicML in a deal valued at roughly $1.3 billion.

ETFs in Focus

Against this backdrop, below, we highlight a few AI ETFs that should be tracked closely in the coming days.

iShares Robotics and Artificial Intelligence Multisector ETF (IRBO - Free Report) – P/E: 20.37X

ROBO Global Robotics & Automation Index ETF (ROBO - Free Report) – P/E: 22.93X

Global X Artificial Intelligence & Technology ETF (AIQ - Free Report) – P/E: 25.01X

First Trust Nasdaq Artificial Intelligence & Robotics ETF (ROBT - Free Report) – P/E: 27.49X


Published in