by The AI marvel ChatGPT can write poetry, answer trivia questions, and take tests. But it fails with S&P 500 stock picks, meaning you’ll have to look elsewhere to bring AI into your portfolio. There are ways to do this though.
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Financial advice is one area that ChatGPT will not touch. To make matters worse for investors hoping to leverage it for stock selection, knowledge of AI is limited after 2021, when its creators stop providing it with historical data.
“I’m sorry, but as a language model AI I don’t have the ability to provide personalized financial advice or predict the future performance of specific stocks,” ChatGPT replied to the question “Which stocks should I buy?”
So how to bring AI into your portfolio? There are other ways.
AI-powered ETFs
Several ETFs already blatantly use AI to pick the stocks they hold. And many of them are having a good year, easily beating the S&P 500.
There are at least 10 ETFs that use artificial intelligence to pick the positions they hold. One of the largest ETFs of its kind, the nearly $1.9 billion SPDR S&P Kensho New Economies Composite ETF (KOMP), is up more than 13% this year. The ETF uses artificial intelligence to identify companies driving the technology that is transforming the economy.
Similarly, use the $121 million AI Powered Equity (AIEQ) ETF IBM‘s (IBM) Watson AI to choose your portfolio using fast-changing algorithms. It is also outperforming the S&P 500 up 12.8%. He’s betting a lot JPMorgan Chase (JPM) and Disease Treatment Society Novavax (VAX).
AI Powered Equity “currently favors everything from healthcare/biotech to energy and names exposed to US consumer health,” said Jessica Rabe of DataTrek Research. “AIEQ has diversified its holdings across a number of sectors and has put the majority of its capital out, which has been a successful strategy to start 2023. The machine thinks US stocks have turned over a new leaf.”
BTD Capital Fund (DIP) is another interesting angle that lets AI do the trading for you, says VettaFi’s Todd Rosenbluth. The ETF uses a computer to find stocks to buy on a decline for a quick profit.
Humans pick AI S&P 500 winners
Another approach to cash in on AI is thematic ETFs. These funds use human portfolio managers to select companies positioned to cash in on artificial intelligence. Again this year they are mostly outperforming.
There are at least seven of these ETFs. One of the largest is the Global X Robotics & Artificial Intelligence ETF (BOTZ) ($1.5 billion). The ETF is up nearly 19% this year. Great locations include Nvidia (NVDA), a maker of the computer chips that power many AI machines. Nvidia’s stock is up a staggering 53% this year, in part due to the buzz around ChatGPT.
It’s important to note, however, that the Global X Robotics & Artificial Intelligence ETF owns 44 stocks. This dilutes the power of any single winner. And it’s not just about investing in the US Only 43% of his portfolio holds US-based stocks. Japan is in second place with 36% and Switzerland in third place with 13%.
Trying to pick winners AI
You may not trust AI to choose your actions. And you may want more perks from the winners. If so, you might try to pick the individual companies that score the most on the rise of AI.
Nvidia is a logical choice. But many are also betting C3.ai (AI), the pure AI game based in Redwood City, California. The AI company’s shares have already risen 128% this year. Works with giants like Amazon.com (AMZN), Alphabet (Google Microsoft (MSFT) on artificial intelligence.
But even this approach is highly speculative. Analysts think C3.ai will lose money until at least 2026, when it is seen making a small profit.
“Investors are starting to realize that there is too much information to process in the market and that they could benefit from artificial intelligence,” Rosenbluth said. “But computers can only follow the rules humans require of them. So it’s important to understand that there are limits.”
Let the AI choose your actions?
The best ETFs where AI chooses the portfolio
| ETFs | Symbol | Assets ($ million) | YTD % cap. | Fee |
|---|---|---|---|---|
| Fairness powered by artificial intelligence | (AIEQ) | 121 | 13.1% | 0.75 |
| SPDR S&P Kensho New Economies Composite | (KOMP) | $1,780 | 12.8 | 0.20% |
| UBC algorithmic foundations | (UBCB) | 2.4 | 10.5 | 0.75 |
| US QRAFT Large Cap powered by AI | (QRF) | 4.9 | 7.8 | 0.75 |
| BTD Capital Fund | (IMMERSION) | 1.8 | 5.5 | 1.29 |
| AI-Powered US Large-Cap QRAFT Momentum | (A MOM) | 11.9 | 5.1 | 0.75 |
| WisdomTree US AI Enhanced Value Fund | (AIVL) | 424 | 4.4 | 0.38 |
| Optimize Event-Driven Smart Sentiment AI | (OAI) | 0.5 | 3.9 | 1 |
| Merlyn.AI Bull-Rider Bear-Fighter | (WIZ) | 21.9 | 1.0 | 1.29 |
| AdvisorShares Let Bob AI-Powered Momentum | (LETB) | 26.1 | 0.0 | 0.49 |
