It’s the time of year that investors consider which stocks to buy and sell to build their portfolio for the next 12 months.
Inflation, supply chain disruptions and the ongoing COVID-19 pandemic are setting up 2022 to be an unpredictable year. One unique approach to the market for the coming year is to look at which stocks are being purchased by artificial intelligence.
Related Link: 8 Trading Themes To Watch In 2022
The AI Powered Equity ETF AIEQ is an ETF that is powered by the International Business Machines Corp IBM AI supercomputer Watson. The fund is managed using proprietary AI algorithms that choose which stocks to buy and how much of the portfolio to allocate to each stock.
Top Holdings:
Here’s a look at the AIEQ fund’s eight top holdings heading into 2022:
- Advanced Micro Devices, Inc. AMD
- Palo Alto Networks Inc PANW
- DexCom, Inc. DXCM
- Eaton Corporation PLC ETN
- Fortinet Inc FTNT
- Nutanix Inc NTNX
- Avantor Inc ANTR
- Iron Mountain Inc IRM
AMD has been one of the hottest stocks in the market in the past three years, and Watson seems to think that momentum will continue in 2022. Watson is also particularly bullish on cybersecurity stocks, given Palo Alto Networks and Fortinet are both among its top five holdings.
Conspicuous by their absence among the roughly 80 holdings in the AIEQ fund are the FANG stocks, as well as tech giants Microsoft Corporation MSFT and Tesla Inc TSLA. Big tech stocks have led the market higher in 2021, but Watson doesn’t seem to anticipate additional outperformance in 2022. Watson does, however, have Apple Inc. AAPL among its top 20 holdings.
How To Play It: DataTrek Research co-founder Jessica Rabe said this week that AI stock picking is a unique approach to the market, and it could get much better over time as the AI becomes more advanced. For now, Rabe said investors can use the AIEQ fund as somewhat of a guide.
“We may not know why the ETF is favoring certain names, but it provides a list of ideas from which to conduct further research,” she said.
Benzinga’s Take: Watson may be one of the smartest machines on the planet, but the performance of the AIEQ fund in 2021 demonstrates just how difficult it is to beat the market. The AIEQ fund’s total return year-to-date is 17.8%, significantly below the SPDR S&P 500 ETF Trust SPY year-to-date total return of 29.2%.
Related Link: Famed Robot-Run ETF Buys Back Into Tesla Heavily After Booking Profits Earlier — Here Are Its Other Bets
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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