The dominance of the “magnificent seven” US technology shares has caused a fresh headache for professional stockpickers, with active US and global equity funds struggling to match the returns both of their tech cohort and the wider market of which they form part. But with companies such as Nvidia (US:NVDA) powering ahead, in part because of their association with artificial intelligence (AI), it’s worth asking how the funds targeting this specific theme have fared.
Several exchange-traded funds (ETFs) track baskets of AI stocks, and while some thematic portfolios can differ widely in terms of what they hold, funds available to UK investors in this space have made very similar returns this year. The L&G Artificial Intelligence ETF (AIAG) has made a 27.1 per cent sterling total return for 2023 as of 6 November, with the WisdomTree Artificial Intelligence ETF (INTL) up by almost exactly the same amount. Sanlam Global Artificial Intelligence (IE000IKG3JC0), an active fund, is up by 23.4 per cent, but one active outlier, the Ossiam Europe ESG Machine Learning ETF (LEMV), is down by around 1 per cent.
Looking at the first two names, they appear more diversified than some other thematic funds. The L&G ETF holds some of the usual AI suspects, from Microsoft (US:MSFT) to Nvidia, but has no standout big bets. Its biggest position, in Alteryx (US:AYX), comes to just 2.9 per cent, the fund has 62 holdings, and its biggest 10 positions make up only around a fifth of its assets. The WisdomTree fund, which tracks a different AI index, has a similar number of positions but, as per their latest disclosures, these two funds recently shared just two top 10 holdings in the form of Splunk (US:SPLK) and Advanced Micro Devices (US:AMD).