This Tiny AI ETF Could Be a Hidden Gem

Advances in artificial intelligence (AI) have captured the imagination of the market and the general public alike in 2023, so it’s no surprise that AI-focused ETFs are enjoying solid year-to-date gains. With just $13 million in assets under management (AUM), the WisdomTree Artificial Intelligence and Innovation Fund (BATS:WTAI) could be a hidden gem among these funds. Here’s why there’s plenty to like about this tiny, under-the-radar ETF.

AI is Just Getting Started

WisdomTree writes that AI “is a transformative megatrend that has the potential to influence nearly all aspects of how we live and work globally in the years to come.”

And while AI offers plenty of long-term growth potential, it’s also being used in plenty of applications that are impacting our lives and businesses today — whether it’s chatbots like ChatGPT, self-driving technology in cars, industrial automation, or workflow automation software.

Legendary investor Stanley Druckenmiller, who reportedly returned 30% annually over a 30-year timeframe while running Dusquense Capital, recently said that AI could be “every bit as impactful as the internet.” He also said that while he believes we are in for a “hard landing” economically, AI leaders like Nvidia and Microsoft could be “unbelievable opportunities” coming out of a hard landing.

Further, he noted that even if there is a major recession, Nvidia’s opportunity in AI is so compelling that he’s not convinced that Nvidia’s share price will go down, even though it sports a high price-to-earnings multiple.

Thoughtful Diversification

WTAI offers investors a diversified and comprehensive way to gain exposure to AI. Not only does it hold 76 different stocks, but it’s also not overly concentrated toward its top positions like some other AI-themed ETFs. Its top 10 holdings make up just 22.6% of the fund, which means that investors aren’t left overly exposed to the ups and downs of a few large holdings. Top position Nvidia accounts for just a 3% weighting, which is reasonable.