Companies around the world are leveraging advanced technology to drive innovation and enhance efficiency in the workplace. Optimism about Artificial Intelligence (AI) has been high ever since the launch of ChatGPT by OpenAI in November 2022. In the first quarter of 2024; companies in the AI sector raised over US$11 billion in funding for companies like Moonshot AI, Minimax (China)and Humanoid Robot (US). 

The backbone of AI applications is the processing units made by chipmakers, and this is where the most market action is. As the leading manufacturer of chips for degenerative AI, NVIDIA - with a massive 80% of the semiconductor chip market dwarfing companies like Advanced Micro Devices inc. (AMD) - has clocked in returns north of 200% in the last 12 months.

Getting a Slice of AI

Without having to create your own basket of shares, the Satrix NASDAQ 100 ETF is one of the most convenient ways for South African investors to get a slice of the AI action. NVIDIA is among the top three holdings in the fund, accounting for 6.3% of its weighting, while AMD makes up 2.1%. Another big AI player in the fund is CrowdStrike, making up 0.5% of the fund, which uses AI to proactively identify and address digital security threats. Broadcom makes up 4.6% of the fund, a company in the semiconductor and infrastructure software industries. 

Almost 50% of the fund is made up of the “Magnificent Seven” stocks – Microsoft, Apple, Alphabet, Amazon, Nvidia, Tesla and Meta which are leading innovations in the AI space. Though historical returns cannot guarantee future returns, the NASDAQ index that this ETF tracks has pulled in 48.6% in the last 12 months to March and 12.5% year-to-date in rand terms.

The Rest of the International Scene

AI is not an isolated sector and many of the technological advances also apply to other industries. In the US this has further helped grow Large Cap stocks with Info-Tech stocks raking in US$18 million in inflows for the first quarter of the year, according to Bank of America. 

In March, the MSCI US Index was up 3.1%, while the MSCI UK and MSCI Euro indices were up 4.5% and 3.7% respectively, in dollar terms. The MSCI World and the S&P 500 indices were both up 3.2% during the month, while the NASDAQ Index was up 1.2% and the MSCI Emerging Markets Index was up 2.5%.

Locally it has Been a Gold Rush

Local markets held strong for the month, with the FTSE/JSE All Share Index up 3.2%, recovering from two negative months that began the year. Propped up by the mining sector, particularly gold stocks (Harmony up 40.4% and Gold Fields up 22.5%), the Resource Index was up 15.4% for the month, while the Industrials index was up 2.9%, and Financials were down 3.5%. Listed Property slowed in March after a strong start to the year, with the FTSE/JSE SA Listed Property Index (SAPY) down 1.0%. With the South African Reserve Bank (SARB) putting the rate cut on ice for the moment, the bond market dragged during the month with the FTSE/JSE All Bond Index (ALBI) down 1.9% while Cash was up 0.6%. 

The rand ended February at R19.18 to the dollar and strengthened to R18.94 by the end of March, a 1.3% appreciation.


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