Astute investors recognize that the internet serves as a fertile ground for various applications of artificial intelligence (AI). The intersections between this emerging technology and companies once considered pure-play internet firms are becoming increasingly evident.
Interestingly, some companies that were previously viewed as the most “pure” internet stocks are now leading the charge in the AI space. Fortunately, investors don’t need to engage in stock-picking to capitalize on this trend. The ALPS O’Shares Global Internet Giants ETF (OGIG) includes several prominent AI leaders within its portfolio.
With a market capitalization of $161.1 million, OGIG tracks the O’Shares Global Internet Giants Index. This ETF stands out due to its flexibility, which allows it to hold a diverse range of technology stocks. Unlike many traditional funds that are heavily weighted towards communication services and consumer discretionary sectors, OGIG allocates nearly half of its holdings to the technology sector. This strategic positioning makes it a compelling, albeit understated, option for investors interested in AI.
Exploring OGIG’s AI Chops
OGIG’s ability to include technology stocks means it features well-known AI leaders, such as Microsoft (MSFT), which is the ETF’s largest component at 6.20%. This positioning is advantageous for investors.
“Microsoft is one of three public cloud providers capable of delivering a wide array of PaaS/IaaS solutions at scale. Its investment in OpenAI has positioned the company as a leader in AI,” noted Morningstar’s Dan Romanoff. “Additionally, Microsoft has successfully upsold users on higher-priced Office 365 versions, particularly those that include advanced telephony features. These factors contribute to a more focused company that showcases impressive revenue growth, high and expanding margins, and deepening customer relationships.”
OGIG’s flexibility extends to its exposure to international equities, making it a global player. Notably, China represents the ETF’s second-largest geographic allocation, which is significant as both China and the U.S. are recognized as leaders in the AI landscape.
Many competing ETFs focus solely on domestic stocks, thereby lacking exposure to major players like Alibaba (BABA) and Tencent (TCEHY), both of which are also highlighted by Morningstar as top AI stocks. These companies are included in the OGIG portfolio, enhancing its appeal.
Improved Advertising Technology
“Tencent holds a significant position in China’s internet sector, offering a diverse range of products and services that are utilized daily by a large portion of the population,” stated Ivan Su of Morningstar. “The immediate and measurable impact of Tencent’s AI investments will be seen in enhanced advertising technology, which improves content recommendations and reduces ad creation costs.”
VettaFi.com is owned by VettaFi LLC (“VettaFi”). VettaFi serves as the index provider for OGIG and receives an index licensing fee. However, OGIG is not issued, sponsored, endorsed, or sold by VettaFi, which holds no obligation or liability in connection with the issuance, administration, marketing, or trading of OGIG.
For more news, information, and analysis, visit the ETF Building Blocks Content Hub.
