Concerned that continually high U.S. interest rates may undermine corporate valuations, investors have begun to extract money from ETFs (exchange-traded funds) that monitor AI (artificial intelligence) companies following an early-year surge.
Investors were profiting from the soaring stocks after their quick rise this year.
In September, investors pulled $14.3 million from the lesser ROBO Global Robotics & Automation Index ETF while they put $1.8 million into the larger Global X Robotics & Artificial Intelligence ETF.
June of 2023 saw the most significant monthly net inflows for both funds, totaling $265.5 million and $29.74 million, respectively, as reported by Lipper.
According to Aniket Ullal, head of ETF statistics and analytics at CFRA Research, ETFs focused on artificial intelligence and robotics took in over $1.9 billion in the first three quarters of 2023. After the debut of Chat GPT-4, this ensued.
Recent weeks have seen a decline in AI stocks alongside the rest of the market as investors’ risk appetite has been subdued by Treasury yields that are around 16-year highs.
According to Ullal, September inflows were lower than expected because of the market’s anticipation that interest rates will remain elevated for a longer time, which might negatively affect cash flow estimates for technology companies.
Retail investment in artificial intelligence has stalled as the early hype dies down. According to Vanda Research, the net retail flows into AI-linked shares in September were $1.96 billion, the lowest monthly total since April.
Megacap chipmaker Nvidia’s share price has climbed by more than 200% year to date, contributing to the Global X fund’s 21% gain.
UBS Global Wealth Management’s chief investment officer, Mark Haefele, recently noted that the fall presented an excellent opportunity to gain exposure to AI leaders.
This pessimistic outlook may shift in Q4 if large-cap tech companies like Nvidia, owned in AI-themed tech ETFs, maintain their recent trend of solid earnings growth. Ullal of CFRA says that this is the case.