ETFs Seen Investing in AI Stocks post Strong Results from Nvidia

After six weeks of outflows, investors poured money into an exchange-traded fund tracking artificial intelligence stocks, owing to strong quarterly results from chipmaker Nvidia and rising optimism that US interest rates have peaked. According to Lipper data, the Global X Robotics & Artificial Intelligence ETF received $35.5 million in net inflows in the week ending Wednesday, the most since June earlier this year.

ETFs tracking AI stocks had a strong start to the year, fueled by the viral success of ChatGPT, but the rally stalled after June on concerns that persistently high US interest rates would harm technology company valuations. The growing prospect of a rapid flip to rate cuts by the Federal Reserve next year also has driven investors into beaten-down Treasuries, pushing Treasury yields down and boosting rate-sensitive technology and growth stocks.

"Improved inflation data and the likelihood of rate cuts in the second half of 2024 have maintained market optimism throughout November, contributing to investor interest," said Tejas Dessai, AVP, Research Analyst at Global X.

"In general, Generative AI is rapidly transitioning from experimentation to adoption to monetization, and we are beginning to see tangible revenue and profit opportunities emerge."

The Global X fund has gained 27.7% year to date, aided by a 233% increase in shares of its top holding Nvidia, whose graphics processing units (GPUs) dominate the AI market. The chipmaker's strong results on Tuesday have also played a role in driving sentiment towards AI ETFs, according to Aniket Ullal, CFRA's head of ETF data and analytics.

On Nov 22, daily inflows into the fund reached $17.2 million, the highest level in more than two months, after Nvidia forecast overall revenue above Wall Street targets as supply-chain issues eased. So far this year, the Global X fund, which has total net assets of $2.2 billion, has seen net inflows of $554.8 million.