Nvidia stock spike shines light on ETFs offering AI exposure

Nvidia stock spike shines light on ETFs offering AI exposure
As interest in artificial intelligence grows, it's worth looking under the hood of sector ETFs.
MAY 26, 2023

If there was any doubt about the potential impact of artificial intelligence, the spike in the price of chip maker Nvidia (NVDA) serves as a reminder of how eager the markets are to embrace the AI space.

The stock price is up more than 160% since the start of the year, including a 26% one-day gain after the company's earnings report this week highlighted its focus on artificial intelligence.

With a market cap hovering around $1 trillion, Nvidia is emerging as a poster child of where investing in AI can go. But for financial advisors who might be less keen on chasing stocks to the sky, the smarter way to jump on the bandwagon might be through certain diversified slices of the ETF space.

According to VettaFi, there are at least 10 ETFs where Nvidia has a weighting of between 10% and 15%, which could provide a lot of exposure to the hot stock.

Sumit Roy, senior ETF analyst at ETF.com, believes the surge in Nvidia’s stock price will be a boon for those ETFs with heavy weightings in the stock. And for market-cap weighted indexes, those weightings will only get bigger as the stock price continues to climb.

But because Nvidia is just one of several companies developing and advancing the various channels of AI, a cleaner type of exposure could be carved out through specific sector funds, said Todd Rosenbluth, director of research at VettaFi.

A few examples include Global X Robotics & Artificial Intelligence (BOTZ), which has a 9.6% NVDA weighting; Roundhill Generative AI Technology (CHAT), at 7.8%; and Robo Global Artificial Intelligence (THQ), at 2.2%.

“Since ChatGPT emerged, AI has become a buzz word within the investment industry, and companies exposed to it and ETFs that provide access are top of mind for many advisors,” Rosenbluth said. “But this is still a nascent technology, so there is reward potential but also high risk.”

Investors should stay defensive as corporate profits deteriorate

Latest News

Financial advisors, what is your volatility game plan for client management?
Financial advisors, what is your volatility game plan for client management?

With targeted "comfort calls" and strategically automated follow-ups, advisors who leverage their CRM systems effectively can show up when clients need them most.

Trump eyes no taxes for Americans making less than $150k, says Lutnick
Trump eyes no taxes for Americans making less than $150k, says Lutnick

The plan could offer $24,000 in relief for some taxpayers, but experts warn of consequences.

No new trial for convicted GPB Capital executives
No new trial for convicted GPB Capital executives

"I've seen lots of denial in this business but this GPB thing take the cake," says one industry executive.

BlackRock-led deal for Panama Ports draws ire from China
BlackRock-led deal for Panama Ports draws ire from China

Commentary from state-owned publication blasts sale to investor consortium as "spineless groveling," denting Hong Kong-based firm's stock.

Gold soars past $3,000 as Trump turbocharges record rally
Gold soars past $3,000 as Trump turbocharges record rally

Higher interest rates and a strong US dollar, which traditionally act as headwinds, haven't deterred market-stung investors from seeking refuge in the yellow metal.

SPONSORED Beyond the all-in-one: Why specialization is key in wealth tech

In an industry of broad solutions, firms like intelliflo prove 'you just need tools that play well together'

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies