Proactive Investors - Let's be honest, artificial intelligence was everywhere in 2023.
Chatbots were created for pretty much everything, OpenAI boss Sam Altman was ousted, Microsoft joined the party with billion-dollar investments, ChatGPT 4 came out, Sam Altman was reinstated and the whole landscape of the tech industry changed.
And as long as a revolutionary new development doesn’t usurp AI’s crown, it will likely be sticking around in 2024, meaning investors will want to get involved if they haven’t already.
How to invest?
Unless you’re Proactive’s Billy Farrington and have the foresight to choose a 236% year-to-date riser as your stock pick for the year, it can be hard for investors to navigate their way through the horde of investment options posing as the next AI king.
The high-rising pick chosen by Billy was Nvidia, which was able to establish itself as a clear market leader in the chipmaking industry after OpenAI used its products to train ChatGPT.
Yet, rivals Advanced Micro Devices (NASDAQ:AMD) and Taiwan Semiconductor Manufacturing Company (TSMC) are looking to disrupt the market.
The first-mover advantage was certainly in full effect in 2023, but will next year see it turn into a first-mover disadvantage?
“Perhaps a concerning sign was NVIDIA’s third quarter results, in which the chip company hugely outstripped analyst expectations and lifted its fourth-quarter guidance, only to see its share price slide,” said Laith Khalaf, head of investment analysis at AJ Bell.
“It feels like the market might be wanting ever more miraculous acrobatics in order to elicit a round of applause. Certainly, the rich valuations placed on the tech sector leave little room for error in operational performance, and any slip-ups could consequently be harshly punished.”
AI Trusts
Like picking a film on Netflix (NASDAQ:NFLX), sometimes too many options can be a hindrance rather than a benefit.
That can be the beauty of trusts, the managers who run them do the hard work and shares in the investments can often be bought at a discount to the net asset value.
Proactive, with help from the AIC and Morningstar, has looked at the top AI trusts to find out which ones did best in 2023.
Manchester & London Trust
Manchester & London Investment Trust plc (LSE:MNL) rose close to 63% in 2023 and did it without holding a dollar worth of Meta, Amazon or Salesforce.
Despite the exclusion of some of the biggest players, it was still the most weighted to AI companies out of all the trusts, with over 65% of its holding weighted to the industry.
Shares in the trust offer more than an 8% discount to its estimated net asset value (NAV) of around 610p per share, according to analysts at Hargreaves Lansdown (LON:HRGV).
The trust's top holdings are:
- Microsoft Corp (NASDAQ:MSFT) 31.88%
- ASML (AS:ASML) 10.26%
- Cadence Design (NASDAQ:CDNS) Systems 8.04%
- Synopsys Inc (NASDAQ:SNPS) 7.88%
- NVIDIA Corp (NASDAQ:NVDA) 5.91%
M+L offers a 2.59% dividend yield, which is distributed semi-annually.
Polar Capital Technology Trust
The trust was opened back in December 1996 and was listed two months later, with shares in the investment collection up more than 2,300% since then.
However, it is 2023’s rise of over 46% which has caught the eye of tech investors.
Polar Capital Technology Trust PLC (LSE:PCT) shares can be picked up at over an 11% discount, with a total asset value of more than £3.5 billion.
Weighted 43% towards the leading AI stocks, the trust holds all of the current big players and, like most trusts in this list, is heavily weighted towards Microsoft.
Its top five holdings are:
- Microsoft Corp 10.89%
- Apple Inc (NASDAQ:AAPL, ETR:APC) 8.17%
- NVIDIA Corp 7.11%
- Meta Platforms Inc (NASDAQ:FB) Class A 4.06%
- Alphabet (NASDAQ:GOOGL) Inc (NASDAQ:GOOG) Class A 3.87%
Allianz (ETR:ALVG) Technology Trust
Following closely in third place is the Allianz Technology Trust, a 28-year-old British investment trust which boasts close to a 44% jump in 2023.
It has more than a 57% weighting to AI companies but is focused on the tech giants, particularly the magnificent seven.
Allianz Technology Trust PLC (LSE:ATT)'s largest AI omission is Dutch semiconductor company ASML, with the trust going for Nvidia and TSMC instead.
Available at a 12.4% discount to its net asset value, shares trade at around 300p, but don’t distribute any dividends.
Its largest holdings are:
- Microsoft Corp 9.15%
- Meta Platforms Inc Class A 8.12%
- NVIDIA Corp 7.61%
- Alphabet Inc Class A 6.88%
- Apple Inc 6.75%
JPMorgan (NYSE:JPM) American Trust
The fact a US-focused trust ranks fourth is testament to the importance and strength of Silicon Valley and America’s dominant technology industry.
It is again the performance of the magnificent seven which has helped it deliver more than a 23% jump since the start of the year.
As expected, the trust is void of TSMC, ASML and German software specialists SAP, but has also avoided Salesforce, Intel (NASDAQ:INTC) and Adobe (NASDAQ:ADBE).
Shares trade at a 1.5% discount and hold £1.6 billion worth of assets.
Its top holdings are:
- Microsoft Corp 7.89%
- Amazon.com Inc (NASDAQ:AMZN) 5.10%
- Apple Inc 3.96%
- Meta Platforms Inc Class A 3.92%
- Alphabet Inc Class C 3.44%
BlackRock (NYSE:BLK) Greater Europe Investment Trust
A list with the top trusts wouldn’t be fit without the world’s largest asset manager finding its way in.
However, BlackRock’s winning trust highlights that while the US remains the top dog in the AI game, Europe is close behind.
Shares are up over 17% in 2023 and while it has had to rely on some non-tech stocks like Novo Nordisk (CSE:NOVOb) and LVMH (EPA:LVMH), it has achieved these gains without any of the magnificent seven and is the only trust without Microsoft at number one.
Shares offer a 6.4% discount and distribute a semi-annual dividend yield of 1.2%.
Its top tech holdings include:
- ASML Holdings NV Eur 6.33%
- BE Semiconductor Industries NV 5.04%
- STMicroelectronics (NYSE:STM) NV 4.25%
Same in 2024?
Whether these gains can be repeated in 2024 will likely depend on whether a tech firm can disrupt the paths of leaders like Nvidia and Microsoft.
A constantly shifting landscape means within days a new AI leader could come to the forefront.
For retail investors, it can prove difficult to track every single upcoming company, let alone extract value from the smaller competitors.
A safe and easy choice, as highlighted by the trusts above, is to pick up shares in the top tech companies and hope they continue the same path in 2023.
However, to truly ease efforts, it’s clear that tech trusts like the ones mentioned are the best options, with fund managers (or their AI replacements) doing the grunt work, while you can sit back and hope for another 60% increase in 2024.