How Traders Are Seeking Bullish Opportunities In A Hype-Clouded AI And Robotics Market

Tech stocks are enjoying a strong rally driven partly by advances in artificial intelligence, robotics, and automation. But such a robust rally in an otherwise stagnant and uncertain economic landscape has some worried that AI may be a bubble with the potential to burst as catastrophically as the dot com bubble. Despite those fears of a bubble bursting, there are a number of analysts that are still optimistic about the emerging tech. So where are traders looking for bullish trades in a rally that some say has already peaked?

Continued Pause in Rate Hikes Could Help AI “Bubble” Become A Boom

The Fed paused interest rate hikes in June. While economists aren’t as certain about that pause as they seemed a few months ago, that pause could be taken as an encouraging signal for investors who’ve been hesitant about participating in the AI-driven rally. 

Even as AI-related stocks have climbed this year, only a tiny fraction of that growth is driven by retail investors, who injected just around 100 million (according to Markets Insider), in net daily cash flow into these stocks through May 29. That lack of further investment does not seem to be for lack of interest, though. As cash flow declined over April and May, the Google search volume for “AI” and related keywords has soared. 

The market appears interested, but cautious. So any upcoming signals that the economy is at least sidestepping a recession could boost confidence enough for retail investors to potentially lead a second rally in AI stocks.

Short-term traders may want to keep an eye on key macroeconomic catalysts like the next Fed meeting, the next consumer price index report and the next jobs report from the Bureau of Labor Statistics to help gear up for AI-related trades.

Robotics Is Transforming Nearly Every Industry

Robotics companies have raised over $1.63 billion (according to The RobotReport) in investments so far this year, with autonomous vehicles and surgical robots leading the pack. Self-driving cars have taken a lot longer to hit the roads than automotive makers like Tesla, Inc. TSLA and Ford Motor Company F initially predicted, but they’re far from a lost cause. Widespread adoption could still be years away but pilot programs are already underway and driver assistance systems, like Tesla’s Autopilot, are already built into vehicles using similar tech that fully autonomous cars use.

These early days of the emerging autonomous vehicle market are already generating yield for the tech stocks making the sensors, cameras, chips and other hardware that’s used to make them. Nvidia Corporation has already partnered with Hyundai, Jaguar, Volvo, and other car manufacturers to deploy its NVIDIA DRIVE platforms, for example. The supercomputing platforms are used to process the data coming from cameras and sensors, geo-locate the car on a map, and use that information to plan driving routes. 

The tech company has seen its stock steadily climb since January, rising more than 160% so far this year as of July 26, 2023, as we believe it looks poised to profit from the emergence of self-driving cars as well as AI. Nvidia’s graphics processing units (GPUs) are already powering ChatGPT.

Cognex Corporation, meanwhile, is up in 2023 as well, gaining over 15% in May alone as the company’s latest earnings release showed a strong cash position as it continues to launch new products. The company’s sensors, 3D vision systems and AI-powered deep learning technology are all essential in building self-driving cars. But the company is applying its AI and robotics systems to other industries as well, including manufacturing, medicine, life sciences, and solar power. 

Consider Trading The Robot Takeover with the Direxion Daily Robotics, AI & Automation Index Bull 2X Shares

We believe the emerging AI and robotics markets have only just scratched the surface of their transformative potential. The short-term ebb and flow of hype and outlandish speculations abound in these industries, may be attractive to traders who want to take a bet on the upside. 

One way to translate those bullish views is by using Direxion’s Daily Robotics, Artificial Intelligence & Automation Index Bull 2X Shares UBOT. This leveraged ETF seeks daily investment results, before fees and expenses, of 200% of the performance of the Indxx Global Robotics and Artificial Intelligence Thematic Index*. The index compiles companies from around the world that are believed to benefit from the growing adoption of artificial intelligence or robotics. It includes companies developing driverless cars, cutting-edge robotics, and the hardware needed to build all kinds of emerging tech. There is no guarantee that the fund will meet its stated investment objective.  

The annually reconstituted index includes the following top 10 holdings as of June 30:

INDEX TOP TEN HOLDINGS % as of 6/30/23. Holdings Subject to change and risk.
Nvidia	8.91
Keyence	8.39
Intuitive Surgical	8.34
Fanuc	7.73
ABB Ltd	7.68
Yaskawa Electric	4.51
Omron	4.50
SMC	4.30
Dynatrace	4.22
Cognex	4.04

The 200% leverage seeks to magnify the daily exposure of your trades. But that leverage magnifies losses as well as gains, so be sure to plan your trades carefully and avoid holding the fund for longer periods. But with a well-researched strategy, we believe UBOT can be a great tool for trading potential short-term AI-driven rallies and the potential growth across AI and robotics worldwide. 

To view a list of the fund’s holdings, please click here.

Forecasts are inherently limited and should not be relied upon when making investment decisions.  There is no guarantee the sector will experience projected growth. In addition, there is no guarantee it will translate to positive fund performance.

Featured photo by Possessed Photography on Unsplash.

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

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at www.direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

Leveraged and Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk and who actively manage their investments. 

The Indxx Global Robotics and Artificial Intelligence Thematic Index (IBOTZNT) is designed to provide exposure to exchange-listed companies in developed markets that are expected to benefit from the adoption and utilization of robotics and/or artificial intelligence, including companies involved in developing industrial robots and production systems, automated inventory management, unmanned vehicles, voice/image/text recognition, and medical robots or robotic instruments, as defined by the index provider, Indxx. Companies must have a minimum market capitalization of $100 million and a minimum average daily turnover for the last 6 months greater than, or equal to, $2 million in order to be eligible for inclusion in the Index. One cannot directly invest in an index.

Direxion Shares Risks – An investment in the Fund involves risk, including the possible loss of principal. The Fund is non-diversified and includes risks associated with the Fund concentrating its investments in a particular industry, sector, or geographic region which can result in increased volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. Risks of the Fund include Effects of Compounding and Market Volatility Risk, Leverage Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Daily Index Correlation Risk, Other Investment Companies (including ETFs) Risk, Cash Transaction Risk, Tax Risk, and risks specific to the securities of the Robotics & Artificial Intelligence Companies, and the Industrials and Information Technology Sectors. Robotics and artificial intelligence companies may have limited product lines, markets, financial resources or personnel. These companies typically face intense competition and potentially rapid product obsolescence. Robotics and artificial intelligence companies, especially smaller companies, tend to be more volatile than companies that do not rely heavily on technology. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.

Distributor: Foreside Fund Services, LLC.