Artificial Intelligence (AI) has seamlessly integrated into our daily lives, revolutionizing various aspects often unnoticed by many. From personalized YouTube recommendations to the efficiency of Grammarly and the conversational abilities of ChatGPT, AI has become an indispensable part of our digital landscape. According to PwC, the projected contribution of AI to the global economy is an astonishing $15.7 trillion by the end of the coming decade. To put this into perspective, by 2030, if AI were a country, it would boast the third-largest economy globally, surpassing India and trailing only behind the US and China.
Given the transformative potential of AI, the question arises: Why should Indian investors be left behind in this generational game-changing opportunity?
![AI Fund Growth](https://thesundayfinancials.com/wp-content/uploads/2024/02/AdobeStock_379037615-1024x603.jpeg)
Before diving into the investment landscape, it’s crucial to identify what we mean by AI stocks. “AI stocks” refer to shares or equities of companies that are actively involved in the development, implementation, or utilization of artificial intelligence (AI) technologies. These companies are at the forefront of the AI industry, either by creating AI software and hardware, incorporating AI into their products and services, or leveraging AI for various applications. The major forefront companies involved with AI are:
- Alphabet (Google)
- Amazon
- Advanced Micro Devices (AMD)
- ASML Holding N.V.
- Meta (Facebook)
- Intel
- Microsoft
- NVIDIA
While none of these AI giants are based in India, several Indian mutual fund schemes, both active and passive, have strategically invested in them. Let’s figure out those for our benefits.
Passive Funds: Following the AI Trail
Mutual Funds Embracing AI – Examining the ETFs and index funds reveals substantial investments in the aforementioned eight AI stocks.
These funds mirror the performance of their underlying index, as illustrated in the graph at the right side.
![Passive Global Funds with AI Stocks Exposure](https://thesundayfinancials.com/wp-content/uploads/2024/02/Screenshot-2024-02-03-at-7.24.56 PM-1024x455.png)
Top 5 Global AI Stocks involved Passive Funds are:
Active Funds: A Tactical Approach
Even actively managed funds, where fund managers make strategic stock selections, have channelled significant amounts of Indian investors capital into these AI stocks. Notably, the concentration of AI investment is evident among a select few funds, with the top five commanding an 88% share of the total AI investment.
Those five funds amounting to a staggering 12,000 crore (approx.) in actively managed schemes:
![Active Global Funds with AI Stocks](https://thesundayfinancials.com/wp-content/uploads/2024/02/Screenshot-2024-02-03-at-8.33.22 PM-1024x528.png)
If you want to understand, how the mutual fund industry in India is structure, Please visit “Structure of Mutual Funds“
Quick Observations: Insights into AI Investment Trends
- Preference for Alphabet (Google): Four out of the five highlighted schemes have invested in the California-based tech titan, reflecting a strategic preference for Google in AI-focused investments.
- Exclusion of NVIDIA Stocks: Surprisingly, none of the top five funds currently hold positions in NVIDIA stocks, raising interesting questions about the diverse investment strategies adopted.
Key Takeaways: Navigating the AI Investment Landscape
Investors looking to delve into the realm of AI stocks can choose from two distinct routes:
ETFs and Index Funds: These options track the US-based NASDAQ index, providing a broader exposure to all eight AI stocks. This approach is recommended for investors seeking geographical diversification.
Active Funds: However, active funds should be considered only by those with a more focused investment strategy. The concentration of AI investment in a few select funds emphasizes the importance of strategic decision-making.
While our study did not delve into Fund of Fund schemes, it’s worth noting that investors could explore this option for additional diversification opportunities.
It’s important to note that the landscape of AI stocks is dynamic, and the prominence of companies in this field may evolve over time as the industry continues to advance. Always conduct thorough research and consider the latest information before making investment decisions.
Disclaimer: No Funds listed here are recommendations, it’s for educational purpose only, so you can consider your investment plans accordingly.