These days, a huge amount of money is being invested in AI. The AI ETF for AI-related stocks also continues to break record highs. If you can invest in the winners of this era, it is an opportunity to change your life, but it is not as easy as you think. This is because the biggest beneficiaries of times of technological upheaval usually come from unexpected places.
However, if you let go of your greed and take advantage of the huge flow of wealth, you can expect high profits that far exceed market profits, even if they are not life-changing profits. Moreover, as the benefits of ISA accounts grow, investing through domestically listed ETFs has become very advantageous.
So, today we would like to discuss domestically listed AI ETFs that can take advantage of the overall growth of the AI industry.
Stock selection criteria
Based on the criteria below, we selected ETFs consisting of companies with high exposure to generative AI and compared them.
The ETF selection criteria are as follows.
Recently, the number of ETF options has increased rapidly, and ISA benefits have improved, so there seems to be no need to directly invest in ETFs.
- It must be a Korean ETF (to invest in an ISA account..)
The goal is to ride the wave of certain wealth rather than the jackpot that may be hiding somewhere.
- Must be a global representative company in each AI-related field
Robot ETFs and cloud ETFs cannot be considered unrelated to AI, but they are also fields in which factors other than generative AI issues are involved.
- There should not be a strong bias toward specific themes such as robots, semiconductors, or cloud.
The stocks selected based on these criteria are as follows.
Category Name of stockIntensive investment in Big TechARIRANG US Tech 10iSelectTIGER US Tech TOP10INDXXACE US Big Tech TOP7 PlusKODEX US FANG Plus (H)Full-directional diversified investmentHANARO Global Generative AI Active TIGER Global AI ActiveTIMEFOLIO Global AI Artificial Intelligence ActiveARIRANG Global Artificial Intelligence Industry MV
After selecting according to the criteria, we were naturally divided into 2 groups of 4 items. We started the survey without distinction, but the composition and characteristics of the two groups were very different, so we organized them separately.
There are some things to keep in mind before comparing.
- Among the 8 stocks, Tiger Global AI Active was listed on October 11, 2023, so these are the results after that.
- The results are too short to compare performance, and there is a very high probability that CAGR will decrease and MDD will increase.
- Therefore, please refer to it only for comparison between stocks.
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If you are unfamiliar with terms such as CAGR or MDD, we recommend that you read the article below.
Choosing a good ETF, let’s learn about ETF investment criteria
Intensive investment in big tech
Due to the nature of generative AI, it is by far Big Tech that is leading the current theme. This is because each value chain, including AI models, semiconductors, infrastructure, and service provision, requires enormous capital, data, and high technological capabilities.
As I have said repeatedly, considering the size of these companies, which exceed 1,000 trillion won, it will not be easy to hope for 10 or 20 times growth. However, much of the capital flowing into the AI field will flow to these companies.
###Basic information and achievements
[table id=6 /]
Holdings
[table id=8 /]
As expected, ACE US Big Tech TOP7 Plus, which showed a relatively high proportion of Nvidia, showed the best performance. Although MDD was the highest, it was 1.5% different from the minimum value, and the Sharp ratio was also the highest. The fees were also the lowest. If I were to point out a disappointing point, it would be that exposure was concentrated in the top six stocks, but other stocks were not much different, so they stood out the most among the four stocks above.
In the case of KODEX US FANG Plus (H), which had the second highest profit, it was differentiated from other stocks in that it was not concentrated in a few stocks and was well diversified, but it was disappointing that it was a foreign exchange hedging product.
In terms of stock composition, the remaining two stocks are expected to be similar to KODEX and ACE in the long run, but in the case of TIGER and ARRIRANG, the commission was higher than ACE, but there was no difference between the stocks, and in the case of ARRIRANG, the trading volume was so low that there seemed to be no reason to choose it.
All-round diversified investment
Google, the leading internet company, Facebook (currently Meta), the icon of the SNS era, and Tesla, the unrivaled leader in electric vehicles. These were all companies that did not receive much attention when the industry started.
Rather, it was a market in which there were oligopolistic companies that were predicted to be strong winners in the sector.
The same may be true for the AI market. This is even more true if you look only at the rate of return, regardless of the leading stock. There is a very high probability that the stocks with the highest returns in the AI market will not be in the example above.
Even NVIDIA, which seems to be the protagonist of the AI era whose future is already decided, was called “sideways dia” just two or three years ago.
For reference, in the analysis of the four holdings below, only stocks invested with a proportion of 1% or more are shown for convenience. In the case of ARRIRANG, there were many applicable stocks, and 28 stocks were omitted. To check all stocks, we recommend ETF Check.
###Basic information and achievements
[table id=7 /]
Holdings
[table id=9 /]
As with active ETFs, performance and holdings vary widely. However, the winner was relatively clear: TIMEFOLIO's product. The commission rate and MDD were the highest, but the rate of return was enough to barely cover them.
The Sharp ratio, which measures performance against risk, was insufficient compared to HANARO products, which is thought to be due to Nvidia's proportion of 20%. Unless you have an aversion to NVIDIA, TIMEFOLIO seemed like the best choice.
If I had to choose the next best choice, it would be HANARO. The Sharp ratio was the best, showing a well-diversified portfolio with relatively no bias.
However, the transaction volume of around 200 million was disappointing. In these stocks, situations where LP volume is received even when trading in the millions of won occur very frequently.
conclusion
If you want to invest heavily in Big Tech, what if you want to tryACE US Big Tech TOP7 Plusin small and medium-sized blockbuster stocks?TIMEFOLIO Global AI Artificial Intelligence Activeis recommended. However, NVIDIA's proportion is too high, so if you are concerned about this,HANARO Global Generation AI Activeis also a good choice.
Naturally, this opinion is the result of a simple comparison of past performance and does not guarantee future profits.
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