Investment funds to bet on artificial intelligence | Commercial

The European Union has approved the world's first artificial intelligence (AI) law. It's been one of the big headlines in recent weeks. Not a day goes by without AI in the news. Probably this Christmas season, this technology is among the most heated family conversations. “This is a…

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The European Union has approved the world's first artificial intelligence (AI) law. It's been one of the big headlines in recent weeks. Not a day goes by without AI in the news. Probably this Christmas season, this technology is among the most heated family conversations. “This has become a catalyst and a canvas for the future,” said Liz Centoni, Cisco's chief strategy officer and general manager of applications. It is already in our homes, our cars, our offices and our bags. It is also beginning to attract the attention of investors; Beyond the so-called Magnificent Seven, namely: Apple, Microsoft, Nvidia, Amazon, Meta (Facebook), Tesla and Alphabet (Google). AI-connected financial vehicles are beginning to proliferate; Because they invest in companies in the sector (or industries affected by them); Because they use it for their wealth management. In general, these are investment funds or ETFs, whose evolution this year, in terms of profits, is more than positive, in many cases the revaluations are more than 40% (however, it should be remembered that in 2022, losses of that amount. common). Following is a list of major products by category (in alphabetical order).

On the one hand, there are investment funds: Allianz Global Artificial Intelligence, Dws Artificial Intelligence, Echiquier Artificial Intelligence, Thematics AI & Robotics Fund (Natixis IM), Oddo Bhf Artificial Intelligence, Polar Artificial Intelligence and Vontobel Artificial Intelligence and Vontobel Property. In general, they are all global equity funds that invest not only in companies developing AI, but also in others that precisely benefit from the development of AI, mainly focusing on the health, energy, environmental and automotive sectors. To a greater or lesser extent, these funds are using AI as a complement – ​​fundamental analysis of companies continues to be decisive – to establish correlations between different variables and thus refine their management models.

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On the other hand, ETFs (exchange-traded funds or listed funds in Spanish, linked to different AI and technology stock indices): Global X Robotics & Artificial Intelligence, L&G Artificial Intelligence Uses ETF, iShares Automation & Robotics, WisdomTree Artificial Intelligence Ucit ETF, Xtrackers Artificial Intelligence & Big Data Ucits ETF and Xtrackers Future Mobility Ucits ETF. The thing is, before getting started in the world of investing in AI, experts specializing in this technology offer the following recommendations.

  • Long term investment and risk of loss. As Brice Prunas, manager of the Oddo Bhf artificial intelligence fund, explains, “As artificial intelligence is a long-term secular trend that will shape the entire economy, investors should be prepared to invest for the long term.” In his view, technology is only the tip of the AI ​​iceberg. According to him, “We are at the forefront of a real revolution, because creating content with AI (also known as “generative AI”, of which ChatGPT is the most famous example, but not the only one) means that for mass adoption of AI, it is no longer necessary to be a geek to interact with AI. ” According to their analysis, companies in content-intensive industries (e.g., marketing agencies, movie studios, etc.) and sectors that have created very large data sets, such as healthcare or finance, are ready to adopt the AI ​​revolution very quickly. , if not already the case. In the future, the importance of the term, “AI will go even further: companies in practically all sectors may be motivated to integrate it into their business processes to stay competitive.” Brunas asserts that these types of funds “present capital loss, variable income risk, and model risk.”
  • Pay attention to volatility. For Jesús Ruiz de las Peñas, director of business development at Iberia and spokesperson for AI issues at Alliance, these funds are not suitable for all investors – “If the horizon is three to six months, it's better to avoid it,” he says. —, because they focus on stocks that have a higher level of volatility than conventional stocks, standing at around 30%. However, in his view, the best time to invest in any trend is when that theme begins, and this moment is now. Tobias Rommel, portfolio manager at DWS Invest Artificial Intelligence, emphasizes this idea, saying, “Fluctuations are very natural. With these types of companies, most of the value creation is years into the future. If interest rates rise, as they did last year, growth companies will suffer because they outperform the broader stock market. Conversely, if interest rates fall again, their valuations will be favorable.
  • Pay attention to ratings. Vontobel is clear that the excitement for companies to benefit from generative AI must be accompanied by strict valuation regulation. According to him, “Each company has a tangible difference in achieving an estimated increase in profits driven by AI. “It's about giving credit to companies for what's possible, not just what's plausible.” For Jesús Ruiz de las Peñas from Allianz, the target of investments must be chosen carefully because a kind of “social Darwinism” will occur, whereby “only the companies that are best at adapting to change will survive.” However, he said there is no valuation bubble at the moment and “no resemblance to the tech boom of the 2000s, when 90% of companies lost money, and now that percentage is 10%, and, in most cases, without debt.”
  • Importance of periodic contributions. The best investment strategy, according to Tobias Rommel of DWS, is to establish a savings plan in which a fixed amount is invested continuously over a long period of time, “because one can benefit from market fluctuations in values. For an average cost effect.”
  • Certified financial products. As Cisco points out in its recent report on AI predictions for 2024, the risk of scams and scams could be high. Consumers and businesses will face increased cyber threats from AI-enabled misinformation, scams and fraud, and drive collaboration to strengthen cybersecurity and digital literacy. “Protecting ourselves against cloned voices and videos, deepfakes, bots and malicious content will require greater investments in advanced technologies and mechanisms that can detect and mitigate these risks,” they explain.
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