Artificial Intelligence (AI) is one of the powerful mega forces reshaping the global economy. There are several ways to approach this theme for investors seeking exposure to AI.
The primary reasons that make AI a more enduring investment opportunity is when we compare to prior waves of technology via the PC, the smartphone, the internet, the cloud, those are all amazing productivity tools. AI however, represents something quite different. This is, akin to building intelligence. Manufacturing intelligence. And this is something that we've not seen before.
And in this regard, it has actually consolidated and captured the entire emphasis of the entire technology industry. So for the balance of this decade, I would suspect that AI will be the predominant driver of growth.
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AI-related ETFs aim to capture the broad impact of AI technologies, offering exposure to a cross-section of companies that could stand to benefit from AI advancements.
Historic infrastructure investment
AI's growth has been driving a historic capital expenditure cycle across the broader infrastructure of this technology, spanning many sectors and industries.1
Semiconductor revenue surge
The AI chip market could surge, reaching $1 trillion in revenue by 2030, providing a broad investment avenue for investors.2
Energy demand growth
Critical IT power capacity in the U.S. will need to triple from 2023 to 2027, and surge well beyond, to keep pace with rising demand driven by AI.3
The release of ChatGPT in late 2022 reignited global interest in AI, marking the beginning of a new era. The AI revolution is not merely about building new tools, it is about developing systems that think, reason, act, and adapt like humans.
AI models increase in performance with more compute and data. The number of parameters proxies the complexity and capability of AI models.
Source: BlackRock, August 31st, 2024. For illustrative purposes only. There is no guarantee that any forecasts made will come to pass.
Chart description: Line chart showing the growth in AI model complexity over time, measured by the number of parameters. It tracks models like GPT, GPT-2, GPT-3, and GPT-4, highlighting future models expected to reach trillions of parameters.
Investing in AI-related ETFs doesn't have to be complicated. iShares offers several ways to access the AI theme, from pure-play technology exposures to products targeting the broader AI ecosystem.
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Investors may consider investing in AI as it is reshaping industries and economies around the world. AI's rapid growth demands significant investment in infrastructure like data centers, semiconductors and raw materials, offering an opportunity for investors to tap into a market that could be poised for significant growth.
AI technology has been driving a historic capital expenditure cycle, with significant infrastructure investments needed for data centers, semiconductors, and power. This buildout is anticipated to continue for years, offering an opportunity for investors to participate in the AI theme.4
In our view, active investment strategies will be key to identifying likely winners over time and active stock investors with deep technical knowledge may be best suited to navigate this space. Investors interested in the AI theme may also choose pure-play or complementary exposures targeting themes within the broader AI ecosystem.
Investing in AI focuses on a specific transformative technology with growth potential, while tech sector investments cover a broader range of companies and innovations. AI investment offers a targeted approach to a sector driving significant infrastructure and economic changes.
iShares offers AI-related ETFs that bring potential solutions to investors looking to harness the potential growth opportunities stemming from AI technology, spanning across active approaches to AI and global tech to exposure to the full AI value chain.
BlackRock uses AI to inform investment decisions, analyze large data sets, and help understand complex problems and to enable investment professionals to develop innovative investment approaches.
Investing in AI carries risks such as data inaccuracy, intense competition, rapid product obsolescence, and dependency on consumer base and end-user demand. Companies may also face sector-specific market and business risks, affecting overall performance.
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1 BlackRock, "Thematic Mid-Year Update," June, 2024. Forward-looking estimates may not come to pass.
2 McKinsey & Company “The Semiconductor decade: a trillion-dollar industry” as of April 1, 2022. Net growth calculated based on total revenue of $590B in 2021, with a $125b growth in revenue of computing and data storage from 2021 to 2030, accounting for 25% total net growth of the global semi market at $475B. Forward-looking estimates may not come to pass.
3 Semianalysis, “AI Datacenter Energy Dilemma- Race for AI Data Center Space.” As of March 13, 2024. Forward-looking estimates may not come to pass.
4 BlackRock, "Thematic Mid-Year Update," June, 2024. Forward-looking estimates may not come to pass.
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AI technology relies on large data sets, which can lead to inaccuracies. Companies in AI face competition, rapid obsolescence, and depend on demand from various industries. Regulatory scrutiny could limit AI development, with data collection facing closer examination and potential fines. Country-specific regulations could also impact AI and big data companies.
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