WisdomTree Survey: Artificial Intelligence Potential to Outlast the 2023 Tech Rally

Professional investors in Europe view artificial intelligence (AI) as the most compelling long-term investment theme, finds a survey commissioned by WisdomTree, a global financial innovator.

WisdomTree’s research found that AI ranked as the most compelling long-term thematic investment opportunity (28%) for European professional investors as developments in artificial intelligence and solutions like ChatGPT propelled a tech stock rally in the first half of 2023, against an uncertain macro backdrop.

AI was also deemed the most compelling long-term thematic investment opportunity in the 2019 professional investment survey commissioned by WisdomTree, which showcases investor confidence in the theme over recent years.

The survey, conducted by Censuswide, a market research consultancy, polled 803 professional investors across Europe, ranging from wholesale financial advisory firms and institutional investors to wealth managers and family offices. The investors surveyed are responsible for approximately €4 trillion in assets under management.

In 2022, a series of overlapping geopolitical and economic shocks undermined investor sentiment and risk taking, putting portfolios on a defensive footing. This year, despite many of these headwinds persisting alongside new risks to contend with, an optimistic technological breakthrough around AI has provided a powerful counter narrative for investors to buy into.

Alongside this, the research found that across Europe, nearly seven in 10 (68%) of professional investors surveyed reported that the risk appetites of their clients increased, as they look to boost exposures to riskier asset classes such as thematic equities like AI.

Pierre Debru, Head of Quantitative Research & Multi Asset Solutions, WisdomTree, said: “The story for tech investors in 2023 has been driven by AI yet it has been the mega cap tech stocks that have benefited most, rather than those pure play AI companies suggesting there is still upside to be had for those interested in the theme. As always, investors need to take a balanced view to short-term positive or negative performance in thematics as these strategies need to be adopted with a long-term investment horizon. For those with long-term conviction in AI, there are smaller and exciting tech stocks providing pure exposure to artificial intelligence that have not necessarily participated in the rally we’ve seen.”

When looking to invest in AI, almost half (48%) of professional investors surveyed said they are seeking diversity of exposure to relevant business models, rather than to one part of the AI supply chain entirely. Purity of exposure to artificial intelligence (44%) ranked second, indicating investors are seeking investment products that truly represent the AI theme rather than those investing in companies loosely associated with it.

Currently, 85% of European professional investors have an allocation to at least one thematic strategy, with 52% using ETFs to gain their exposure. ETFs are known for their flexibility and transparency, fully disclosing their holdings on a daily basis. As no two thematic strategies in a given theme are created equal, having this level of transparency allows investors to take a deeper look at holdings to ensure purity of theme, something they are unable to do with other investment vehicles.

 

Chris Gannatti, Global Head of Research, WisdomTree, said: “When it comes to investing in artificial intelligence, like many thematic investment products, investors have an array of options available. A benefit to accessing thematics through ETFs is that they are transparent, allowing investors to spot any overlaps in their portfolio. This transparency can also help investors determine if a product is an accurate reflection of the promised theme or if the strategy provides limited exposure too. We believe that thematic ETFs, built with third-party subject-matter experts, are best placed to accurately reflect the industry and ecosystem – while providing all the transparency needed around holdings. Our research seems to indicate that this approach is what investors desire, allowing them to potentially access the winners of tomorrow and beyond.”

 

About Lisa Baker, Editor 2419 Articles
Lisa Baker is the Editor of Always Finance, and writes about Business, Finance Technology and Healthcare. Lisa is also the owner of Need to See IT Publishing.