Trade The Deep Learning Market With Direxion's AI And Big Data 2X Bull And Bear Funds

Palantir Technologies PLTR led several big data and deep-learning-related enterprises higher during Monday's premarket session, with investors eager to right the ship in the broader technology ecosystem. Arista Networks ANET, which offers data center and cloud-networking systems, also saw its equity value rise before the opening bell. Both companies play crucial roles in converting the capabilities of artificial intelligence into practical results.

As mentioned in a Benzinga article earlier this year, analysts at UBS UBS believe that the AI sector could see massive expansion, reaching a market value of $225 billion by 2027. In 2022, the industry was worth only $2.2 billion. Therefore, the explosive forecast implies a compound annual growth rate of nearly 152%. Even better, AI has brought conveniences and enhanced productivity in diverse spaces, such as the foreign exchange (Forex) market.

At the same time, not everyone is convinced that AI-focused entities will continue on their upward trajectory without first encountering a corrective spell. One such example is semiconductor giant NVIDIA Corp NVDA. Though NVDA stock also moved higher during Monday's premarket session, it incurred a rough outing for the business week ending July 26.

Early this month, New Street Research analyst Pierre Ferragu downgraded NVDA stock to Neutral from Buy. Specifically, the expert stated that the security is "getting fully valued" following a blistering performance this year. Prior to this downgrade, investment bank Goldman Sachs essentially warned that the valuations of certain AI stocks have become extremely rich.

The ETFs: With the global AI sector featuring compelling arguments on both sides of the aisle, Direxion's leveraged and inverse exchange-traded funds could be compelling for risk-tolerant retail traders. First, the Direxion Daily AI and Big Data Bull 2X Shares AIBU is a 2X leveraged ETF that tracks the performance of the Solactive US AI & Big Data Index.

Second, for those who are pessimistic about the direction of AI stocks, traders can acquire units of the Direxion Daily AI and Big Data Bear 2X Shares AIBD. This fund also tracks the performance of the Solactive index but reverses and leverages it. Therefore, if the index falls 1%, AIBD should rise 2%.

Both the AIBU and AIBD funds are designed for short-term exposure no greater than one day. Exposure beyond one session exposes stakeholders to the daily compounding effect, which may erode returns over the long run.

The AIBU Chart: Because the tech sector suffered disproportionately more in the business week ending July 26, it wasn't surprising to see the damage acutely reflected in the AIBU ETF.

• When the closing bell rang out on Friday, AIBU locked in a price of $26.95, well below its 20-day exponential moving average of $28.71.
• However, the July 26 session also represented a gap up from Thursday's close of $26.01. Combined with the strong premarket performance of individual names like PLTR and ANET, the 2X leveraged ETF may attempt to initiate a recovery.

The AIBD Chart: On the flip side, the devastation in the tech space last week represented a positive catalyst for the AIBD fund. During the period, the inverse 2X ETF gained over 6%.

• Practically mirroring the misfortune of its counterpart, the AIBD fund closed the Friday session at $22.86, above its 20-day EMA of $21.91.
• Volume on Friday was very weak compared to the robust volume levels of the preceding sessions. Considering the context of strong premarket tech performances, AIBD could struggle on Monday.

Featured photo by Gerd Altmann on Pixabay.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice.