Wall Street's Irony? One Of The Oldest AI-Powered ETFs Fails To Capitalize On AI-Driven Market Rally

Zinger Key Points
  • The AI Powered Equity ETF has gained 2.4% in 2023 so far.
  • In the same period, the S&P 500 has registered over 8% gains while the Nasdaq has risen over 20%.
  • AIEQ’s portfolio roughly contains 150 stocks and is mainly inclined towards software and internet shares.

One of the oldest artificial intelligence-powered exchange-traded funds, the AI-Powered Equity ETF AIEQ, is currently lagging behind the S&P 500 and the Nasdaq Composite in terms of year-to-date returns at a time when the market gains are driven by AI-based stocks.

While the AI Powered Equity ETF has gained 2.4% in 2023 so far, based on data available at the time of writing, the S&P 500 has registered over 8% gains while the Nasdaq has risen over 20% in the period, according to Benzinga Pro.

Bloomberg reported the story earlier on Tuesday.

Also Read: Best Exchange Traded Funds (ETFs)

Notably, investors have loaded up on tech stocks like NVIDIA Corporation NVDA, Microsoft Corp MSFT and Alphabet Inc GOOG GOOGL that are doubling down on their AI efforts, the Bloomberg report noted. While this tech-fueled rally in stocks has helped the indices register decent gains, the relatively lower returns of the AI-powered ETF appear to be ironical.

Big-tech Rally: Jessica Rabe, co-founder of DataTrek Research told Bloomberg it is ironic that an AI-powered algorithm has not capitalized on the rally in big tech stocks that's been driven by its own disruptive technology.

"AIEQ has previously tended to work best when it could catch momentum-driven tech names in broad-based market rallies like during the pandemic crisis, but it's clearly failed to do that this year," she said.

Interestingly, at a certain point in January, the AIEQ was reflecting year-to-date gains of over 16%, outperforming the S&P 500, the report said. However, the outperformance failed to continue.

AIEQ's portfolio roughly contains 150 stocks and is mainly inclined towards software and internet shares, with Palantir Technologies Inc PLTR as its top holding, the report said. While Alphabet is among the ETF's top 10 holdings, it doesn't own popular AI stocks such as Nvidia and Microsoft, it added.

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