Nvidia has been in the spotlight over the past year with a massive 155 percent rise so far in 2024. Earlier this week, the company also got a brief taste of the throne at the top of its market cap. However, Nvidia's success has not spread throughout the industry.
Not all technology companies have benefited equally from the growing demand for AI. AI-related funds such as the Global Market monitoring.
Smaller AI companies are also struggling to achieve a return on investment, despite the potential of their technology, believes research leader Dan Wagelaar at Emerj Artificial Intelligence Research.
– Even if these companies create better technology than Nvidia's, they won't be able to produce it on a large enough scale for large buyers. Buyers then prefer to go with Nvidia, which is also considered less risky, Vagelaar says.
Odd Rosenbluth, director of research at VettaFi, notes that although many AI funds have significant exposure to Nvidia, other components of the funds may have contributed to their drawdown. This includes robotics and industrial companies.
– He explains that these funds have greater exposure to industrial companies that depend more on the economic health of the United States.
Regardless, Rosenbluth says that funds with more balanced weightings to many companies may be better options over the long term:
– If Nvidia stops leading technology, this will be an advantage for more equally weighted funds.
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