fbpx

AI Investments Beats Broad Market Performance

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

By the end of 2023, Artificial Intelligence (“AI”) had become a powerful buzzword in the markets and for good reason: an increasing amount of corporate spending has been in incorporating AI into their operations and offering. AI-driven services are increasingly more adaptable to identifying (as well as replicating) patterns in data of multiple varieties while also potentially offering the means to automate services, thereby reducing human operator costs.

The benefits of AI have also percolated into the public sector, which usually tends to be slower on the uptake. For instance, a recent analysis by the think tank Brookings1 shows that between 2022 and 2023, the U.S.’ Federal government had spent almost $4.5 billion on AI, with nearly 90% of contract value within the Department of Defense.

An increasing number of vendors have been working with the government in the deployment of AI-driven solutions, with American “pure play” AI solutions provider Palantir (ticker: PLTR) occupying the largest share of the pie by some margin.

Given the near-universal adoption of AI-driven services with immense growth potential, it’s no wonder that market participants have been piling up conviction into stocks with high “AI-relevant” exposure. It is entirely feasible to create a “basket” of stocks that capture most major aspects of AI adoption within a limited number of stocks.

Building an “AI” Basket

AI services aren’t just about the algorithm. Effective deployment is often predicated on an effective processor. While microchip development has increasingly centered around AI-relevant architecture, there are a few industry leaders in the present: Nvidia inc (ticker: NVDA), Advanced Micro Devices Inc (ticker: AMD), and Qualcomm Inc (ticker: QCOM) are widely considered to be running at the forefront of AI-relevant hardware design while Taiwan Semiconductor Manufacturing Company Limited (TPE ticker: 2330) is presently considered to be the world’s most prominent foundry for the manufacturing of microchips. Intel inc (ticker: INTC), meanwhile, can be considered as both designer and manufacturer – around 75% of Intel’s chips are manufactured in fabrication plants in Oregon and Arizona. Similarly, Arm Holdings (ticker: ARM) is a British semiconductor and software design company increasingly catering around an AI strategy.

On the “algorithm” side of the business, Big Tech is very prominent: Amazon Inc (ticker: AMZN), Microsoft Inc (ticker: MSFT) and Alphabet Inc (ticker: GOOGL) offer “on-demand” cloud-based computation platforms and infrastructure to corporations while Alibaba (ticker: BABA) does the same predominantly in China. Apple (ticker: AAPL) doesn’t currently have an AI offering yet, it incorporates AI extensively in its products and is expected to make some major inroads via a new “AI strategy”2 in 2024. Similarly, Meta Inc’s (ticker: META) Meta AI is working on developing various forms of artificial intelligence, developing augmented and artificial reality technologies. Another prominent (and arguably the most secretive) AI services provider is, of course, Palantir.

“Basket” Performance versus the Market

Given the price performance of many of these tickers tend to be rather extreme on many an occasion, a time-tested approach to handling this would be to weigh each of these stocks (or their American Depositary Receipts) equally. Each of these tickers – one per company – would thus have a weight of approximately 7.69%.

In the Year Till Date (YTD), the price performance of this equal-weighted “AI” basket versus the broad-market S&P 500 (ticker: SPX) and the tech-heavy Nasdaq-100 shows the former having a clear and massive lead.

Source: Leverage Shares analysis

It didn’t take long for the “basket” to begin its massive outperformance: after 8 days where markets were open for trading, the basket goes from largely following the indices to piling on performance that far outstrips them. Both crests and troughs in the market indices tend to be highly amplified in the “basket”, which is the first indicator as to how heavy market convictions are in “AI-relevant” technology.

For a better sense of conviction, one can also consider constituent-weighted Price to Earnings (PE) Ratios that would be the “effective” PE Ratio for each of these three instruments. An examination of trends here add further nuance to the evolution of investor conviction.

Source: Leverage Shares analysis

On balance, the “basket” tended to underperform relative to the market indices through all of January. The piling of conviction – as shown by the rising PE Ratio performance – begins in earnest after the 7th of February when Arm shoots up on the back of an upbeat earnings release. While Arm’s PE Ratio performance has tended to subside during troughs, they continue to be held when conviction in other constituents of the “basket” rise.

A Basket Ready to Go

The idea of an equal-weighted “AI” basket underpins two of London Stock Exchange’s hottest new Exchange-Traded Products (ETPs). The 3X Long Artificial Intelligence ETP (ticker: GPT3) takes the basket and amplifies its daily returns on the upside by 3 times. For the downside, there’s the -3x Short Artificial Intelligence ETP (GPTS). The basket itself is estimated via the Solactive Artificial Intelligence Index (BBG Ticker: SOLUAI) wherein the constituents are rebalanced on a quarterly basis to provide consistent and rationalized performance.

Given that the basket has amplified crests and troughs relative to broad indices, professional investors will find ample opportunities to capitalise on market convictions in either direction on a tactical basis. Over the course of this year, these ETPs will likely prove to bring some very interesting performance profiles to investors’ profiles. The fact that any potential loss in either of these products is limited only to amount invested and no further (unlike many other products/strategies) certainly helps too.


Footnotes:

  1. “The evolution of artificial intelligence (AI) spending by the U.S. government”, Brookings, 26 March 2024
  2. “Apple announces its big annual conference, where it could reveal its AI strategy”, CNBC, 26 March 2024
Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Related Posts

Gold is in a healthy correction and higher price levels are likely by year end.
Gold is in a healthy correction and higher price levels are likely by year end.
Violeta-540x540-1.jpg
Violeta Todorova
Gold is in a healthy correction and higher price levels are likely by year end.
Gold is in a healthy correction and higher price levels are likely by year end.
Gold is in a healthy correction and higher price levels are likely by year end.
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Violeta-540x540-1.jpg
Boyan Girginov
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Violeta-540x540-1.jpg
Sandeep Rao
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Violeta-540x540-1.jpg
Violeta Todorova
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
Violeta-540x540-1.jpg
Boyan Girginov
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
Leverage Shares ETPs vs Other Leveraged ETPs
Leverage Shares ETPs vs Other Leveraged ETPs
Violeta-540x540-1.jpg
Oktay Kavrak
Leverage Shares ETPs vs Other Leveraged ETPs
Leverage Shares ETPs vs Other Leveraged ETPs
Leverage Shares ETPs vs Other Leveraged ETPs
How Do Leverage Shares ETPs Trade in Multiple Currencies
How Do Leverage Shares ETPs Trade in Multiple Currencies
Violeta-540x540-1.jpg
Pawel Uchman
How Do Leverage Shares ETPs Trade in Multiple Currencies
How Do Leverage Shares ETPs Trade in Multiple Currencies
How Do Leverage Shares ETPs Trade in Multiple Currencies
ETF vs ETP: What they are and how do they differ?
ETF vs ETP: What they are and how do they differ?
Violeta-540x540-1.jpg
Violeta Todorova
ETF vs ETP: What they are and how do they differ?
ETF vs ETP: What they are and how do they differ?
ETF vs ETP: What they are and how do they differ?
Gold is in a healthy correction and higher price levels are likely by year end.
Gold is in a healthy correction and higher price levels are likely by year end.
Violeta-540x540-1.jpg
Violeta Todorova
Gold is in a healthy correction and higher price levels are likely by year end.
Gold is in a healthy correction and higher price levels are likely by year end.
Gold is in a healthy correction and higher price levels are likely by year end.
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Violeta-540x540-1.jpg
Boyan Girginov
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Violeta-540x540-1.jpg
Sandeep Rao
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Violeta-540x540-1.jpg
Violeta Todorova
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.

Sandeep Rao

Research

Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

Marketing Lead

Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak

Head of Communications and Strategy

Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

Gold Retreats But Rally is Not Over

Copper Ready to Explode

Q2 2024 Market Outlook: Rocky Road Ahead

What is an ETF? (Exchange Traded Fund)

How do Leverage Shares ETPs differ from other leveraged ETP issuers

How Do Leverage Shares ETPs Trade in Multiple Currencies

Build your own ETP Basket
Leverage Shares: Europe’s top leveraged and inverse ETP provider.
Main ETP benefits
Common investor questions

Get the Newsletter

Never miss out on important announcements. Get premium content ahead of the crowd. Enjoy exclusive insights via the newsletter only.

Welcome to Leverage Shares

Terms and Conditions

Notice

If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.

If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.

Risk Warnings

The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.

This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.

Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.

This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.

United States Visitors

The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.

Persons accessing this website in the European Economic Area

Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).

Exclusion of Liability

Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.

Leverage Investment

Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.

Cookies

Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.

This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2. 

By clicking you agree to the Terms and Conditions displayed.