Among teh exchange traded funds (ETFs) that include both ‘artificial intelligence (AI)’ and ‘power’,the product wiht the largest size (market capitalization) is ‘KODEX US AI Power Core Infrastructure’. It includes many ‘hot American stocks’ such as GE Vernova, whose stock price has soared more than four times in the past five years. Though, due to the recent AI bubble controversy, the stock prices of both the stock and the related ETF are falling.
There are six ETFs in Korea alone (based on a market capitalization of 100 billion won or more) that combine AI and power. AI makes human life more convenient, and the power that makes it work is a bundle.We live in a world where it is standard to install a large-scale power source nearby when building a data center.
Therefore, it is natural to bundle AI and power-related companies into an ETF so that you can buy them all at once. It is indeed expected that provided that the world continues to invest in AI, the rate of return for related investors will be good. However,as question marks hang over AI profitability and continued investment,skepticism is rising about related ETF investments.
As AI becomes a power-eating hippopotamus, power production and infrastructure companies are attracting attention.
Is AI a power-hungry hippopotamus?… If your not careful, power supply may be oversupplied.
Among related ETFs, the U.S. AI Power core Infrastructure ETF, a leading stock, plunged nearly 10% on the 21st. It fell 15.8% in the past month (October 21st to November 21st). This is a larger fall than the 2.9% drop in the S&P 500 over the same period. This is due to the recent AI bubble loan and the decline in the possibility of an interest rate cut.
Wall Street is worried about whether the massive investments in AI will continue. This is becuase big tech companies that have a lot
Korean AI ETF Outperforms US Counterpart Despite Concentration Risk
A Korean ETF focused on AI power infrastructure has seen a significant surge this year, rising 30.4% despite a recent market adjustment. This contrasts sharply with the performance of average U.S. power companies, which have fallen 15% over the same period, while the Korean ETF has risen 15%.
The ‘KODEX AI Power Core Facility’ ETF concentrates 70.4% of its holdings in just six companies, representing a total portfolio of only 11 stocks.This highly focused approach represents a considerable investment in AI power infrastructure companies and is highly likely to result in increased stock price volatility.
Despite this concentration, the ETF has more than doubled in value this year (see chart below). Like its U.S. counterpart, which invests heavily in U.S. power infrastructure, the Korean ETF boasts a market capitalization exceeding 1 trillion won, qualifying it for inclusion in tax-advantaged savings accounts like personal pensions.
The Korean ETF primarily invests in the ‘Big 3’ domestic power facilities: Hyosung Heavy Industries (28.1%), LS Electric (20.7%), and HD Hyundai electric (20.2%). this strategy prioritizes maximizing returns over diversifying investment risk.
The stock price of ETFs focusing on domestic power stocks has more than doubled this year. Data = Google Finance
Worth a look