Ernie Bot, Bard, Others Square Off Against ChatGPT as AI Race Heats Up

ETF investors may want to revisit AI-driven funds such as BOTZ, LRNZ.

daria
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Reviewed by: Daria Solovieva
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Edited by: Daria Solovieva

For anyone disappointed by tech’s performance last year, 2023 is shaping up to be an exciting year for tech giants, both established players and new upstarts, looking to leverage the buzz around AI. 

With the pace of global AI search competition accelerating rapidly, for ETF investors, it’s worth revisiting the AI-driven fund names, their strategies and examining which funds are best positioned for the ride ahead. 

Microsoft Corp. for some time has been the boring and steady play in big tech. That’s now changing, with the company’s aggressive adoption of AI technology and accelerating global competition in AI-driven search. 

The company announced on Tuesday that it would directly integrate chatbot features into its Bing search engine and Edge web browser in the hopes of boosting its usage.  

“I never ever felt this liberated in terms of opportunity in the days ahead,” Microsoft CEO Satya Nadella said in an interview with CNBC, noting he has not seen excitement like the AI craze we’re witnessing "since I would say 2007-2008, when the cloud was just first coming up." 

Playing catch-up for a company like Alphabet Inc., which dubbed itself “AI-first” years ago, isn’t easy. Alphabet’s shares dropped nearly 8% on Wednesday after the company unveiled its latest AI-powered search and map features, and the company’s presentation on Monday included an error in Google’ Bard AI chatbot’s answer. 

This accelerating AI race, powered by OpenAI’s ChatGPT’s progress, is looking to redraw the map when it comes to search as well as broader software categories, according to Nadella. 

“To Microsoft, it’s almost a no-lose situation: The company is a distant No. 2 in search, with a 3% market share versus 90%+ for Google,” noted ETF.com Senior Analyst Sumit Roy. “Google has very little to gain and everything to lose, while Microsoft has very little to lose and everything to gain.” 

The race is not limited to U.S. big tech: China’s Baidu and Alibaba are both moving ahead with their own AI chatbot launches. Baidu said on Tuesday it plans to launch an AI chatbot called Ernie Bot following testing in March, and Alibaba said on Wednesday it’s also doing AI chatbot tests.  

‘Massive Paradigm Shift’ 

While the performance of AI-themed funds has been dismal, we’ve seen a strong start to the year, and the sector may see a turnaround and manage to lure investors who see a long-term play in AI. 

There are plenty of options: There are 453 ETFs with exposure to Microsoft, according to ETF.com data. The Technology Select Sector SPDR Fund (XLK) has the largest exposure to the name, at 21%. 

Using ETF.com’s Artificial Intelligence screener, we get 31 AI funds. 

The Direxion Daily Robotics, Artificial Intelligence, & Automation Index Bull 2X Shares (UBOT) has yielded 23% year to date, the Global X Robotics & Artificial Intelligence ETF (BOTZ) is up 11.3% and the iShares Robotics and Artificial Intelligence Multisector ETF (IRBO) gained 11.8%. 

Michael Loukas, CEO of TrueMark Investments, which manages the TrueShares Technology, AI & Deep Learning ETF (LRNZ), told ETF.com his view on AI hasn't changed now that the capabilities of AI search are being recognized. LRNZ is up 20% this year.  

“It reinforces it,” he said. “In our view, the search function itself doesn’t represent value, that investment viability will come from the business model that evolves around it.” 

Acceleration of AI search capabilities will benefit chip makers and data providers, he said. 

“That’s where the immediate value will be found,” he noted. 

 
Email Daria Solovieva at [email protected] or follow her on Twitter @dariasolo           

Daria Solovieva is a former managing editor at etf.com. Before joining etf.com, she worked as a financial journalist for leading publications all over the world, including Fortune, The Wall Street Journal, Bloomberg and others.