Yahoo Finance Bet on AI Ecosphere With These ETFs
The artificial intelligence (AI) corner of the broad technology market has been blazing hot. The market size in the Artificial Intelligence market is projected to reach $184.0 billion in 2024 and record an annual growth rate (CAGR 2024-2030) of 28.46%, resulting in a market volume of $826.7 billion by 2030, per statista.com. In global comparison, the largest market size is dedicated to the United States ($50.16 billion in 2024).
While pure-play AI stocks are ways to play the boom, there are several associated areas in this space that make AI investing lucrative in general. Below, we highlight a few of those.
ETF Areas in Focus
Magnificent Seven – Roundhill Magnificent Seven ETF (MAGS)
The "Magnificent Seven" refers to seven U.S. tech giants, including Apple, Microsoft, Amazon, Alphabet (Google), Meta, Tesla and Nvidia. NVIDIA seems to be the most important beneficiary of AI technology as its graphics processing units are widely used in AI research. Apple, one of the laggards in the AI race, lately announced its much-awaited generative AI initiative called Apple Intelligence.
Then, there are Microsoft’s OpenAI-powered Bing chatbot (Copilot) and Google’s Bard chatbot, now named Gemini. Meta has also integrated AI into its platforms through recommendation software and the Meta AI chatbot. Meta also uses AI to detect and remove harmful content on its platforms.
Amazon Web Services (AWS) provides a vast range of AI and machine learning services, while Amazon's AI-powered voice assistant is integrated into many smart home devices. Tesla’s advanced driver-assistance systems rely heavily on AI and machine learning. Plus, there is Tesla Dojo, which is a custom-built AI supercomputer designed to process vast amounts of data for self-driving applications.
Semiconductor – VanEck Semiconductor ETF (SMH)
Semiconductors play a crucial role in AI for reasons like computing power, Memory and Storage and Custom Hardware. In fact, advancements in chips enable the development of low-power devices suitable for edge AI applications. AI often relies on data from various sensors, such as cameras, microphones and accelerometers.
Utilities – Utilities Select Sector SPDR ETF (XLU)
The AI industry's expansion has led to an increased need for energy sources. An IEA report said that by 2026, the AI industry is expected to consume at least 10 times the electricity demand it had in 2023, as quoted on CNBC.
An IEA report published in January highlighted that, on average, a typical Google search uses 0.3 watt-hours of electricity versus 2.9 watt-hours for a ChatGPT request. This demand is reflected in the stock market, where energy utilities have been gaining traction (read: ETFs to Make the Most of the AI-Powered Utility Sector).
Clean Energy – Global X Hydrogen ETF (HYDR)
While regular fossil-fuel energy has been a source of AI’s energy requirements, demand for clean energy is also rising. In this regard, demand for Hydrogen has been surging. Hydrogen is in stark contrast to fossil fuels, which emit harmful greenhouse gases. Also, its ability to store and release energy also makes hydrogen a likely solution for grid storage, helping to balance the intermittent nature of renewable sources like wind and solar (read: Hydrogen ETFs Soared in May: Here's Why).
Cloud – WisdomTree Cloud Computing ETF (WCLD)
Cloud services have become an indispensable element in AI solutions. Firstly, cloud services provide the computational power required for AI applications. Cloud platforms like AWS, Google Cloud and Microsoft Azure offer scalable infrastructure that can handle computation tasks. Then, cloud services enable data storage and management. Moreover, cloud services ease collaboration and accessibility.
Copper – United States Copper Index Fund (CPER)
Copper ensures efficient power and signal transmission in AI hardware components like servers, GPUs, and data centers. Copper's high thermal conductivity makes it perfect for heat sinks and cooling solutions in AI systems. Copper is the key material in PCBs (Printed Circuit Boards) used in AI hardware. Copper is also used in the manufacturing of sensors and actuators in AI-driven robots and IoT devices.
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Utilities Select Sector SPDR ETF (XLU): ETF Research Reports
VanEck Semiconductor ETF (SMH): ETF Research Reports
United States Copper ETF (CPER): ETF Research Reports
Roundhill Magnificent Seven ETF (MAGS): ETF Research Reports
WisdomTree Cloud Computing ETF (WCLD): ETF Research Reports
Global X Hydrogen ETF (HYDR): ETF Research Reports
