Inflows into exchange-traded funds (ETFs) that track artificial intelligence (AI) companies have slowed down in recent months, raising concerns among investors. The Global X Robotics & Artificial Intelligence ETF saw a net inflow of $1.8 million in September, following significant outflows in the previous month. The smaller ROBO Global Robotics & Automation Index ETF experienced outflows of $14.3 million. In contrast, both funds had their highest net inflows earlier in the year, with the Global X fund gaining $265.5 million and the ROBO Global fund receiving $29.74 million in June.
However, the overall trend for AI and robotics focused ETFs has been positive in 2023. These funds received more than $1.9 billion in net inflows during the first three quarters of the year. The strong start can be attributed to the release of Chat GPT-4. But, like the broader market, AI stocks have been affected by the high U.S. interest rates, which have dampened investors’ risk appetite.
The moderation in inflows can be attributed to the market’s view that interest rates may remain high for a longer period of time, impacting tech companies with cash flows further into the future. Retail investor flows into the sector have also cooled down as the initial excitement around AI dissipates. In September, net monthly retail flows into AI-linked stocks reached the lowest point since April.
Despite recent challenges, the Global X fund has still performed well, with a 21% increase in value this year. This growth has been supported by the surge in megacap chipmaker Nvidia, whose stock price has risen over 200% year-to-date. Investors remain optimistic about the long-term prospects of the AI sector and see the recent weakness as an opportunity to add exposure to AI leaders.
Chief investment officer at UBS Global Wealth Management, Mark Haefele, believes that the negative sentiment surrounding AI stocks could reverse in the fourth quarter, especially if large-cap tech stocks like Nvidia continue to show strong earnings growth.
Sources: Reuters, Lipper data, CFRA Research, Vanda Research
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2023-10-02 16:24:41
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