With the meteoric rise of artificial intelligence (AI) transforming industries and shaping futures, it’s not surprising that investors have been fervently searching for avenues to capitalise on this groundbreaking technology. The allure of AI’s potential has led many to look towards exchange-traded funds (ETFs) dedicated to AI, providing a streamlined path to invest in a broad spectrum of companies at the forefront of this technological revolution.
Exchange-traded funds such as the Global X Artificial Intelligence & Technology ETF and the Invesco AI and Next Gen Software ETF offer shareholders a composite portfolio of companies heavily invested in AI. These funds simplify investment strategies by consolidating a diverse range of AI-centric enterprises into a single, easily accessible financial instrument.
However, for investors with a penchant for a more hands-on approach, selecting individual companies presents an opportunity for a more tailored investment strategy. Instead of entrusting their capital to the broad strokes of a fund manager’s vision, these investors meticulously research and choose specific companies they believe are best positioned within the AI sector.
A strategy employed by some is to use AI-focused ETFs as a navigational tool, identifying which companies are frequently featured across these funds. Let’s delve deeper into four such companies that are often spotlighted within the holdings of numerous AI ETFs, underscoring their prominence and potential within the sector.
The Enigmatic Rise of Snowflake Inc.
Snowflake Inc., a powerhouse in the cloud data platform arena, leverages AI to amass and interpret customer data across a wide array of industries, offering invaluable business insights. This unique approach has not only captured the attention of customers but also positioned Snowflake among the top 15 holdings in 25 different ETFs, a testament to its robust appeal among investors with a focus on AI, technology, and large-cap growth stocks.
The company’s trajectory is noteworthy, having significantly outperformed market expectations with a year-to-date return exceeding 25%. Snowflake’s burgeoning customer base and its consequential momentum in cloud data AI have cemented its status within the industry. Furthermore, the company enjoys a favourable outlook from analysts, with an overwhelming majority endorsing Snowflake as a coveted investment choice, projecting a near 15% growth based on consensus estimates.
Astera Labs Inc.: The Hardware Luminary
Astera Labs Inc. has carved out a niche for itself within AI hardware, specifically through products like retimers and memory controllers that are critical for building AI infrastructure. The company’s prominence is reflected in its representation within 27 ETFs, encompassing both AI and semiconductor-focused funds as well as general growth stock funds.
A recent earnings report painted a vivid picture of Astera’s explosive growth, with earnings per share more than tripling and a staggering 150% rise in revenue—partly driven by significant sales of its Scorpio P CD switches. With major partnerships propelling its journey forward, Astera is on a path of pronounced growth, with analysts predicting an earnings increase of 118% in the coming year.
Oracle Corp: The Legacy Innovator
Oracle Corp, a titan in the realms of database, cloud computing, and enterprise software solutions, has gradually extended its influence into artificial intelligence. By weaving AI into its cloud offerings, including the popular Fusion suite, Oracle has demonstrated its commitment to innovation. This dedication is evident in the company’s inclusion in 145 ETFs as a top-15 holding, highlighting its appeal to investors looking for AI exposure within established tech giants.
Oracle’s remarkable year-to-date surge of 49% can be attributed to a blend of a robust product pipeline, double-digit revenue growth, and strategic new deals, showcasing the potential for continued upward momentum. For investors wary of the volatility associated with smaller AI enterprises, Oracle presents a compelling blend of stability, solid fundamentals, and cutting-edge technology.
Taiwan Semiconductor Manufacturing: Navigating Geo-Political Tensions
Taiwan Semiconductor Manufacturing, a behemoth within the global semiconductor industry, faces unique challenges due to geopolitical tensions, notably concerning tariffs imposed by the Trump administration. Despite these hurdles, the company remains a favoured pick among fund managers, with its shares topping the list in 117 ETFs.
Recent achievements include a significant year-to-date stock price increase of over 18%, fuelled by optimism regarding the company’s strategic planning in mitigating tariff impacts. Analyst consensus echoes this sentiment, viewing Taiwan Semiconductor as an investment with substantial growth potential.
In conclusion, the journey into AI investment is laden with options, from broad-stroke ETFs to precision-targeted company shares. Each of the companies highlighted here offers a unique vantage point into the AI landscape, illustrating the diverse approaches investors can take to navigate this vibrant and rapidly evolving sector. Whether through the comprehensive lens of ETFs or the detailed analysis of individual firms, the path to AI investment is as diverse as the technology itself, promising a range of opportunities for those willing to delve into its depths.
