Good morning,
This week we’re doing a deep dive on A.I. It’s been on the rage on CNBC, Twitter, or wherever you get your day-to-day finance news. Ask one strategist and it will change the world, ask another and it’s just the latest over-hyped bubble.
So which is it?
The correct answer is that it doesn’t matter.
If it’s a bubble, there still can be an opportunity to make money on the way up. But even if the hype is justified, at some point there’s going to be a drawdown larger than you or your clients are willing to deal with. And that’s the rub. Like everything in the market, it will ultimately come down to price and risk management.
Today’s report will review:
Diversified ways to play the AI boom
Leading individual stocks
Why managing risk is so important
and more!
Let’s dive in!
Technicals for key ETFs
SMH: Semiconductors
One of the most notable beneficiaries of the AI boom are semiconductors. The VanEck Semiconductor ETF exploded higher last month on the back of Nvidia’s historic move and helped propel the Beat the S&P 500 model to some solid outperformance vs. its benchmark. However, the technical setup was already there, as SMH had broken out from an inverse head and shoulders pattern back on February 1. That pattern measures to $157, and my bet is if we get there, we’re eventually breaking through to new highs.
BOTZ: Global X Robotics and Artificial Intelligence ETF
There are a few focused ETFs with AI literally in the name (ROBT and AIQ are others), but BOTZ is the most investable based on AUM and daily liquidity. It has a similar pattern as SMH that measures to $30, right where there is some technical resistance from 2021. However, this ETF acts very well, is at 52-week absolute and relative highs, and is even avoiding the semiconductor pullback over the past few days.
XT: iShares Exponential Technologies ETF
XT is the weakest of these 3 ETFs, as it is the only one that remains below its February highs. It has a constructive bottoming pattern but has just a neutral trend relative to the S&P 500. The culprit? Overdiversification (197 holdings) and too much exposure down the cap scale (50% of the portfolio is in small and midcaps).
Leading individual stocks
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