Beware: Not All AI ETFs Are Created Equal

On Wednesday, Nvidia (NVDA) shares surged an eye-popping 30%, adding over $200 billion to the company’s market cap and sending the stock to a new all-time high.

The source behind the strength? Incredible demand for the company’s new chips, which are expected to be the backbone for running many Artificial Intelligence (AI) systems that are in development.

It’s not just NVDA riding the AI wave, the biggest stock gains this year have come from companies that will either be supplying the tech to build AI infrastructure or businesses that will benefit from integrating AI features, such as Large Language Models (LLM). By some measures nearly all of the Nasdaq’s 100 (QQQ) 22% year-do-date gains have been fueled by AI related stocks such as Microsoft (MSFT) and Alphabet (GOOGL).

So, it might be surprising to find an AI ETF, like AI Powered Equity ETF (AIEQ), that not only didn’t participate in the rally on Thursday, but is actually down some 5% for the year to date!

This is just another reminder of the importance of doing research and making sure you know what you own. Magnifi is here to help.

Why has AIEQ fared so poorly despite seemingly being positioned dead center in the hottest investing trend in the market?

Well, the irony is, despite its name AIEQ does not invest in AI-related companies at all! What AIEQ does is use AI to pick stocks.

AIEQ owns no NVDA, Apple (AAPL), Microsoft (MSFT), or any number of the “in play” AI stocks. Rather, of its some 150 stocks in the fund’s holdings, its heaviest concentration of holdings, with a 31% weighting, are in the consumer discretionary sector. Names such as Wingstop (WING), William Sonoma (WSM) and Ollie’s Bargain Basement (OLLI) are among the fund’s top holdings.

Due to the name and similarity to other ticker symbols, some investors might have mistaken…

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