The explosion in usage of ChatGPT and other generative AI tools has opened investors’ eyes to their potential throughout the economy to boost profits and productivity.
Innovative companies like Alphabet, Adobe, Meta Platforms, and Nvidia are among those leading the charge in pushing the boundaries of AI.
Investing in the Nasdaq-100 Index provides exposure to some of the most innovative companies leveraging AI to drive their businesses forward.
Artificial Intelligence (AI) is transforming entire industries and creating opportunities for investors looking for exposure to a trend that could still be in its early stages. As AI technology and applications continue to evolve, they offer attractive growth potential, driven by increasing adoption across various sectors of the economy.
For many investors, their first hands-on experience with the power of generative AI was ChatGPT, which had over 180.5 million monthly users as of July 2024.1 The rapid proliferation of generative AI apps like ChatGPT has been accelerating, and the overall global market for AI is forecasted to rise from $538.1 billion in 2023 to nearly $2.6 trillion by 2032. That’s a projected compound annual growth rate (CAGR) of 19%.2
The Nasdaq-100 Index provides exposure to some of the most innovative companies leveraging AI to drive their business forward.
We examine how four of the largest disruptors in the Nasdaq-100 — Alphabet, Adobe, Meta Platforms, and Nvidia — are positioned to take advantage of the AI revolution.
Alphabet, the parent company of Google, is a leading player in AI with significant investments in machine learning. Google's AI initiatives are integral to its search engine algorithms, Google Assistant, and cloud computing services. For example, Google is tapping its own generative AI to help inform search results. Google Cloud AI includes analytical tools to develop machine learning models, automate work processes, and glean insights from data.
Also, Google's Tensor Processing Units (TPUs) are designed specifically for accelerating AI workloads and infrastructure. With its unparalleled access to data, Alphabet’s Google is poised to capitalize on demand for AI-powered solutions. The company has also proven its commitment to AI with rising capital expenditures in recent quarters, reflecting its confidence in the opportunities offered by AI across its businesses.3
Software giant Adobe has integrated AI into its creative suite in an effort to boost productivity and customize the user experience. One example is Firefly, its AI-powered image generation tool that can integrate with Adobe Creative Cloud, the software suite for professional image and video editing. Adobe Sensei, the company's AI and machine learning platform, powers features across Adobe's products, including Photoshop, Illustrator, and Premiere Pro. Sensei automates repetitive tasks, offers intelligent editing suggestions, and improves content creation efficiency.
Adobe's AI-driven tools are widely used in digital marketing, enabling personalized customer experiences and data-driven decision-making. As the demand for digital content continues to rise, Adobe's AI innovations position it as a leader in the creative software industry, providing significant potential growth opportunities.
Meta Platforms, Facebook’s parent company, is heavily invested in AI to enhance its social media platforms and develop new technologies. AI algorithms play a crucial role in content moderation, personalized content delivery, and advertising optimization on Facebook and Instagram.
Additionally, Meta's investments in the metaverse and virtual reality (VR) rely on AI to create immersive experiences and interactive environments. The company is accelerating its infrastructure investments to support its AI research and product development efforts.4
Nvidia is a leading force in semiconductors and the AI hardware market, offering crucial components for AI computing. The company’s graphics processing units (GPUs) are considered industry standard and widely used for training and deploying AI models.
A key part of Nvidia’s competitive moat is Cuda, its software platform that helps developers leverage the power of the company’s GPUs in their models. Nvidia has also introduced the Blackwell GPU, which is designed to meet the growing demand for AI computing power. With cutting-edge technology, strategic partnerships, and a significant head start, Nvidia is spearheading the AI revolution, driving innovation in both AI hardware and software.
Alphabet, Adobe, Meta, and Nvidia are just some of the many companies in the Nasdaq-100 that are pushing the boundaries of AI in technology and other sectors like consumer discretionary, healthcare, and industrials. As AI continues to evolve, the Nasdaq-100 is a straightforward yet powerful way to get exposure to the increasing adoption of AI technologies.
Access the innovators of the NASDAQ with Invesco’s NASDAQ 100 Index Fund.
“ChatGPT Statistics (July 2024) — Users, Growth & Revenue,” DemandSage.com.
“Artificial Intelligence (AI) Market Size, Share, and Trends 2024 to 2034,” Precedence Research.
Alphabet Investor Relations, 2024 Q1 Earnings Call.
25 years in large value equity
Kevin Holt has been managing large value equity portfolios for 25 years. He reviews what has changed since he started, the current environment, and what’s ahead for large value equity portfolios.
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Important information
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All investing involves risk, including the risk of loss.
The opinions referenced above are those of the author. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.
Definitions:
The Nasdaq-100 Index is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. It is a modified capitalization-weighted index. The stocks' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components. It is limited to companies from a single exchange, and it does not have any financial companies.
Competitive Moat is a term used to describe a company's competitive advantage.
Source Bloomberg: Nasdaq 100 Index Fund class A percentage of total net assets as of 7/30/24 Class A : NVIDIA Corp 7.55%, Meta Platforms Inc 4.29%, Alphabet Inc 2.61%, Adobe Inc. 1.66%
Innovators are companies focused on innovation as measured by R&D expenditure, patent filings, or by other methods. a company that focuses on innovative solutions while creating new markets, increasing market share or enlarging an existing market.
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