One of the most important megatrends that I see is the expansion of artificial intelligence (AI). It’s increasing productivity, taking over jobs and driving innovation. In the next decade, AI will increase global gross domestic product (GDP) by 26%.
The market for artificial intelligence’s enterprise applications has burst onto the scene over the last five years, and it’s expected to boom moving forward!
The chart below shows that market revenues in this segment are projected to increase by over four times in the next four years!
And that’s just one segment’s estimate. Verified Market Research believes that the total global artificial intelligence market could hit $429 billion by 2027 with a 35% compound annual growth rate (CAGR)!
AI is one of the fastest-growing industries today, and companies not investing in it will be left in the dust. According to PricewaterhouseCooper’s report on artificial intelligence trends, 86% of CEOs believe AI will be “mainstream technology” for their companies this year.
Companies are left with a choice: innovate or die.
One of the broadest impacts of artificial intelligence will be its effect on the labor market.
The World Economic Forum’s report on AI forecast that 85 million people will lose their jobs to machines by the year 2025, but it added that the industry would provide opportunities for up to 97 million new openings.
In addition to the millions of jobs that robots will displace, a survey highlighted by Job Market Monitor shows that at the organizational level, 84% of respondents believe that workers will need to change their skills to accommodate the emergence of artificial intelligence.
In healthcare, AI will revolutionize patient care by analyzing health records, making diagnoses and offering data-driven solutions. It will cut costs, and oftentimes the patient won’t even need to see a doctor in person!
That’s just one example. AI will modernize countless other industries, including human resources, retail, marketing and more. With computers that can synthesis information better, faster and without bias, the need for human labor in many cases will become obsolete.
There are so many ways we can play the AI megatrend, but I prefer exchange-traded funds (ETFs) that give widespread exposure to as many practical applications as possible.
Here’re my top two choices.
Pick 1. iShares Robotics and Artificial Intelligence Multisector ETF (NYSEARCA: IRBO)
IRBO focuses on companies innovating in the robotics or artificial intelligence fields. Its investment strategy targets a long-term growth horizon in companies that have groundbreaking potential.
The fund offers meaningful international exposure, with nearly half of its capital deployed in companies located outside the U.S. IRBO’s top three positions by market cap weighting are SOHU.com Ltd. (Nasdaq: SOHU), Weibo Corp. (Nasdaq: WB) and Parade Technologies Ltd. (4966.TWO).
This ETF has a three-month average daily volume of 128,000 shares, and it manages $433 million in net assets. IRBO currently holds 107 companies, and it has an expense ratio of 0.47%.
IRBO has trended higher since the V-shaped recovery last March. With applications of artificial intelligence exploding, it has the potential to go a lot higher.
Pick 2. Autonomous Technology & Robotics ETF (BATS: ARKQ)
As one of Cathie Wood’s prominent ARK funds, this ETF seeks to invest in companies driving innovation in energy, automation, manufacturing and more. It specifically targets autonomous driving, robotics and 3D printing as high-growth investment areas.
ARKQ is highly liquid, with an average volume of 478,000 shares. Its top three holdings are Tesla, Inc. (Nasdaq: TSLA), JD.com, Inc. (Nasdaq: JD) and Trimble Inc. (Nasdaq: TRMB). The fund typically holds between 30 to 50 companies, and it has an expense ratio of 0.75%.
Looking at ARKQ’s chart, we see that it has consolidated over the last several months after a massive rally. A bounce off of support could send it higher.
Technology companies can be susceptible to inflation expectations because their cash flows are projected in the distant future, but oftentimes the biggest winners trade at higher multiples because their growth potential is so high.
Look how they’ve soared since last March! This space has the potential to revolutionize our everyday lives, and we have the opportunity to get in while the industry is evolving. Of course, always conduct your own due diligence and manage risk.
All the best,