First Artificial Intelligence ETF Soars In Popularity

With the hype surrounding and growing interest in AI (artificial intelligence), the newly launched AI Powered Equity ETF AIEQ has shown strong growth potential. This is especially true, as it has been getting the first-mover advantage and accumulated $74.2 million within two months of its inception on Oct 18.

Additionally, the fund is easily outperforming the broad market fund (AX:SPY) by wide margins. AIEQ climbed 4.7% over the past one-month compared to a gain of 2.8% for SPY (NYSE:SPY).

Given this, it might be worth it to shed some light on this ETF and its holdings for those who are unfamiliar with the product, but are thinking about jumping in on the space. Below, we highlight some of the key details regarding AIEQ, which made it one of the fastest growing and one of the most popular ETFs of 2017 (read: Most Interesting New ETFs).

AIEQ in Focus

This is an actively managed and the world’s first AI ETF seeking long-term capital appreciation within risk constraints commensurate with broad market U.S. equity indices. It utilizes the cognitive and big data processing abilities of IBM (NYSE:IBM) Watson to analyze U.S.-listed investment opportunities.

The fund applies proprietary analytical algorithms to AI technology, which can process over one million pieces of information per day, to build predictive financial models on approximately 6,000 U.S. companies. The technology continually analyzes data and models in its active stock selection process, and derives an optimal risk-adjusted portfolio consisting of 30 to 70 companies with high opportunities for capital appreciation.

The product currently holds 69 stocks and is widely spread across components with none accounting for more than 4.41% share. Boyd Gaming (NYSE:BYD) , Nasdaq (NASDAQ:NDAQ) and Forest City FCE/A are the top three elements. Further, the ETF is well spread across market spectrums with 37% in small caps, 33% in large caps and the rest in mid caps (read: 3 Small-Cap Growth ETFs Surging to #1 Rank on Holiday Fervor).

From a sector look, about half of the portfolio is dominated by financials while consumer discretionary, healthcare and information technology round off the next three spots with a double-digit exposure each.

However, the fund comes with a high expense ratio of 0.75% compared with many other smart beta or niche ETFs in the space.

AI Market Outlook

Artificial Intelligence is the simulation of human intelligence processes by machines, especially computer systems. It has gained immense traction over the past few years buoyed by massive demand for analyzing unstructured data like tweets, social media posts, photos and videos. As such, it has been touted as the next big emerging technology and companies are racing to invest in it (read: 4 Smart Beta ETFs for Long Term Investors).

According to a Narrative Science report, 38% of companies surveys have used AI in 2016. This is expected to grow to 62% by 2018. Another study by Forrester Research predicts a year-over-year increase of 300% in investment in AI this year while IDC estimates AI market to grow from $8 billion in 2016 to more than $47 billion in 2020.

Some of the revolutionary AI technologies expected to rule are deep learning, natural language generation, speech recognition, machine learning, virtual agents, AI-Optimized Hardware, robotic processes automation and biometrics.

Given the solid future growth in this niche corner of the market, investors should bet on this lone Artificial Intelligence ETF.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

Boyd Gaming Corporation (BYD): Free Stock Analysis Report

SPDR-SP 500 TR (SPY): ETF Research Reports

Nasdaq, Inc. (NDAQ): Free Stock Analysis Report

AI-PWRD EQ (AIEQ): ETF Research Reports

Original post

Zacks Investment Research