The European Union passes the world's first law on artificial intelligence (AI). That was one of the big headlines of the last few weeks. There is practically never a day when AI is not in the news. This technology has likely been present in many of the most heated family conversations this holiday season. Liz Centoni, chief strategy officer and general manager of applications at Cisco, says: “It has become both a catalyst and a canvas for the future. “It’s already in our homes, our cars, our offices and our pockets.” It is also starting to be in the investor spotlight; even beyond the so-called magnificent seven, namely: Apple, Microsoft, Nvidia, Amazon, Meta (Facebook), Tesla and Alphabet (Google). Financial instruments linked to AI are beginning to proliferate; either because they themselves invest in the companies in the sector (or in sectors affected by them); Well, because they use it for their wealth management. In general, these are mutual funds or ETFs whose profitability evolution this year has been more than positive, with revaluations in many cases exceeding 40% (although it must be borne in mind that the losses in 2022 were of this level). together). The list of major products by type is as follows (in alphabetical order).
On the one hand, there are the investment funds: Allianz Global Artificial Intelligence, Dws Artificial Intelligence, Echiquier Artificial Intelligence, Thematics AI & Robotics Fund (Natixis IM), Oddo Bhf Artificial Intelligence, Polar Artificial Intelligence and Vontobel Fund-Vescore Artificial Intelligence Multi Asset. In general, they are all global equity funds that invest not only in companies developing AI, but also in others that are currently benefiting from the development of AI, with a main focus on the health, energy, environmental and automotive sectors lies. To a greater or lesser extent, these funds also use AI itself as a complement – fundamental analysis of companies remains crucial – to determine the correlation that exists between different variables and thus refine their management models.
On the other hand, we find ETFs (exchange-traded funds or exchange-traded funds in Spanish linked to various AI and technology stock indices): Global X Robotics & Artificial Intelligence, L&G Artificial Intelligence Ucits ETF, iShares Automation & Robotics, WisdomTree Artificial Intelligence Ucit ETF, Xtrackers Artificial Intelligence & Big Data Ucits ETF and Xtrackers Future Mobility Ucits ETF. The point is that experts who specialize in this technology make the following recommendations before entering the world of investing in AI.
- Long-term investment and risk of loss. As Brice Prunas, manager of the Oddo Bhf Artificial Intelligence fund, explains: “Given that artificial intelligence is a long-term, secular trend shaping the entire economy, investors must be willing and able to invest for the long term.” His In our view, the technology is just the tip of the AI iceberg. In his opinion, “we are on the eve of a true revolution, as AI content generation (also known as “generative AI,” of which ChatGPT is the best-known, although not the only, example) opens the doors to mass adoption of AI, as it is no longer necessary to be a geek to interact with an AI.” According to their analysis, companies in content-based industries (e.g. marketing agencies, film studios, etc.) and sectors that have generated very large data sets, such as e.g. Some industries, such as healthcare or finance, are poised to adopt the AI revolution quite quickly, if they are not already doing so. In the future, hence the importance of deadlines, “AI will go much further: companies in virtually all industries may be forced to integrate Generative AI into their business processes at an accelerated pace in order to remain competitive.” Prunas insists that this type of fund “is risk of capital loss, variable return risk and model risk.”
- Watch out for volatility. For Jesús Ruiz de las Peñas, head of business development at Iberia and spokesman for AI issues at Allianz, these funds are not suitable for all investors – “with a horizon of three to six months, it is better to avoid them,” says he. – because they focus on stocks that have even higher volatility than traditional stocks, around 30%. In his view, however, the best time to invest in a trend is when the theme begins, and that moment is now.” Tobias Rommel, portfolio manager of DWS Invest Artificial Intelligence, insists on this idea and points out that ” Fluctuations are completely normal.” For such companies, the majority of value creation lies several years in the future. When interest rates rise like they did last year, growth companies take a hit because they tend to be more expensive than the broader stock market. On the contrary, if interest rates fall again, their valuations will be favored.”
- Pay attention to the reviews. For Vontobel it is clear that the enthusiasm for companies that can benefit from generative AI must be accompanied by strict evaluation discipline. In his opinion, “there is a difference in the certainty of achieving the estimated profit increase from AI for each company.” “It's about giving companies credit for what is very likely to happen, and not just what is plausible.” For Jesús Ruiz de las Peñas from Allianz, the target of investments must be carefully chosen, as a kind of “social Darwinism” will emerge in which “only the companies that adapt best to change will survive”. However, he believes that there is currently no valuation bubble and that “there is no resemblance to the tech boom of the 2000s, when 90% of companies lost money, whereas now that percentage is at 10% and beyond in most cases without Debts.”
- The Importance of Regular Contributions. According to Tobias Rommel from DWS, the best investment strategy is to establish a savings plan in which a fixed amount is regularly invested over a longer period of time, “because then you could benefit from fluctuations in market value at the average cost effect”.
- Certified financial products. As Cisco highlights in its latest report on AI predictions for 2024, there may be an increased risk of fraud and scams. Consumers and businesses will face increasing cyber threats from AI-powered misinformation, scams and scams, driving collaboration to strengthen cybersecurity and digital literacy. “Protecting ourselves from cloned voices and videos, deepfakes, bots and malicious content requires greater investment in advanced technologies and algorithms that can detect and mitigate these risks,” they explain.
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