The popularity of artificial intelligence (AI)-powered chatbots like ChatGPT is catching the eye of exchange-traded fund (ETF) investors looking for exposure to the space. According to a survey by Brown Brothers Harriman released on Monday, a majority of professional investors, 56%, are planning to add AI- and robotics-focused ETF strategies to their portfolios this year, up from 46% in 2022.
The Rise of AI and Robotics ETFs
AI and robotics have beaten all other thematic strategies except internet and technology. This is a stark contrast to 2022 when AI and robotics trailed ESG and digital asset-themed ETFs. The recent rally in AI stocks has supercharged investor interest in the industry. ETFs tracking robotics and AI have pulled in roughly $105 million in March, while other thematic strategies like clean energy, electric cars, and cloud computing all saw outflows, according to data compiled by Bloomberg Intelligence.
The $1.7 billion Global X Robotics & Artificial Intelligence ETF (ticker: BOTZ) led the inflows with about $121 million so far this year, up 24% year to date. Todd Sohn, ETF strategist at Strategas, commented, “There’s always a crowd who wants exposure to the ‘next thing’ — whether it’s AI, SPACs, or EVs. They don’t want to miss the FOMO run, especially given recency bias.”
Investing in Speculative Assets
Despite uncertainty over the Federal Reserve’s next monetary policy move and its impact on risk assets, the survey reveals investors are still keen to load up on certain kinds of speculative assets. Even the crypto winter did not scare investors from cryptocurrency and digital asset-themed ETFs, according to the survey of 325 ETF institutional investors, financial advisors, and fund managers from around the globe.
Forty-eight percent of investors say they still plan to add that strategy in 2023, down just 6 percentage points from last year. Bitcoin, the world’s largest crypto based on market value, has rallied 70% as investors brush off a regulatory crackdown and bet the digital asset’s independence from the traditional financial system could make it immune to the turmoil in the banking industry.
AI as a Deflationary Force
In the case of AI, some investors like Ankur Crawford, a portfolio manager at Fred Alger Management, are betting that AI can be a deflationary force in the long-term because it will drive down costs and improve efficiencies. Crawford explained, “Initially, it might actually be inflationary. There’s a cost associated with it to get it up and running. But later, I do think that’s a deflationary force.”
In conclusion, AI and robotics-focused ETFs have become popular among professional investors looking for exposure to this emerging sector. Despite uncertainty over the Federal Reserve’s next monetary policy move, the survey reveals that investors are still keen to load up on certain kinds of speculative assets, including cryptocurrency and digital asset-themed ETFs. Ankur Crawford, a portfolio manager at Fred Alger Management, believes that AI can be a deflationary force in the long-term, driving down costs and improving efficiencies.
Q1. What are AI-powered chatbots?
A1. AI-powered chatbots are computer programs that use artificial intelligence to simulate human conversation. They can be programmed to respond to user queries and perform tasks.
Q2. What is an ETF?
Q3. What is the difference between AI and robotics?
A3. AI refers to the ability of machines to perform tasks that typically require human intelligence, such as learning, reasoning, and problem-solving. Robotics, on the other hand, refers to the design, construction, and operation of robots, which are machines that can be programmed to perform a variety of tasks.
Q4. Are ETFs a good investment for beginners?
A4. ETFs can be a good investment for beginners because they offer a low-cost way to diversify a portfolio and provide exposure to a range of different asset classes. However, as with any investment, it’s important to do your research and understand the risks involved.
Q5. What is the regulatory environment like for AI and robotics investments?
A5. The regulatory environment for AI and robotics investments is still evolving, but there are a number of issues that policymakers are grappling with, including data privacy, algorithmic bias, and liability for autonomous systems. It’s important for investors to stay informed about these issues and how they could impact the industry.
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