Jerry Hendricks
Portfolio Manager
SAMT Thematic Update
06/15/2023
Strategas Macro Thematic Opportunities ETF (SAMT) New Thematic Investment: Artificial Intelligence (AI)
Theme Description: The growth of ChatGPT has provided the catalyst for companies to aggressively seek ways to utilize artificial intelligence (AI) as a method to enhance productivity as investors are recognizing the importance this technological advancement will potentially play in enhancing an organization's bottom line.
Thesis: Investment options within this theme range from traditional technology companies to automotive to healthcare to any company type looking utilize AI as a productivity enhancer and problem-solver while decreasing the potential risk of human error. For the Strategas Macro Thematic Opportunities ETF (SAMT), we look for those organizations who create and provide software applications capable of offering intelligent learning, coding, data analytics, linguistics, neuroscience as well as other organizations who utilize AI in an attempt to enhance productivity or those in search of more efficient and effective methods to perform their services or enhance their products.
Risks: We recognize an investment in a technology heavy theme seems to go against our longer-term viewpoint of an impending recession, but we view artificial intelligence as a productivity enhancer that will be heavily relied upon by corporations well past any potential downturn in the market.
Late last year, with the introduction of ChatGPT, artificial intelligence as a theme was given its catalyst to propel it past the difficulties around driverless vehicles and into the forefront of investor’s minds. Admittedly, nervousness of lazy students using it to write their term papers on one end to extreme images of Skynet taking over the world on the other appears to be more conversation for cocktail parties than for those seriously researching AI as an investment theme. With ChatGPT becoming the fastest growing software application in history in terms of its first 1 million users, other variations began popping up as companies rushed to be part of this fast-growing market. But while data compiled via Bloomberg, LLC show many of the top performing stocks within the S&P 500 in the first five months of 2023, having some ties to AI, we would note that the use of AI within the business community is more widespread than just answering questions and composing essays.
As defined by the National Artificial Intelligence Initiative Act of 2020, “The term ‘artificial intelligence’ means a machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations or decisions influencing real or virtual environments.“ On an operational level for business use, AI is a set of technologies that are based primarily on deep, machine learning for use with data analytics, predictions and forecasting, object categorization, natural language processing, recommendations, intelligent data retrieval, and more.
In a broader sense AI provides artificial decision making that attempts to perform as a human would in certain situations. While ChatGPT highlighted the search and essay writing capabilities, AI is a broad field that encompasses many different disciplines, including computer science, data analytics and statistics, hardware and software engineering, linguistics, neuroscience, and automation. AI can be utilized by companies for potential productivity enhancements or by those in search of more efficient and effective methods to perform their services or enhance their products.
From a thematic investment perspective, the growth of ChatGPT has companies looking at their operations for indications of how to utilize AI to improve their processes and provide better service. We believe that those companies which either provide artificial intelligence directly or utilize it to enhance their organization will be in high demand from investors as AI may not only enhance products and services, but potentially also have a positive impact on a company’s bottom line.
Finally, while we recognize an investment in a technology heavy theme seems to go against our longer-term viewpoint of an impending recession, we view artificial intelligence as a productivity enhancer that will be heavily relied on by corporations well past any potential downturn in the market. So, while we may be early in our timing, we feel the importance of artificial intelligence as a theme outweighs the risks associated with a possible recession in the near term.
Past performance is not indicative of future results.
This communication was prepared by Strategas Asset Management, LLC ("we" or "us" or “our”). This communication represents our views as of 6/06/2023, which are subject to change. The information contained herein has been obtained from sources we believe to be reliable, but no guarantee of accuracy can be made. This communication is provided for informational purposes only and should not be construed as an offer, recommendation, nor solicitation to buy or sell any specific security, strategy, or investment product. This communication does not constitute, nor should it be regarded as, investment research or a research report or securities recommendation and it does not provide information reasonably sufficient upon which to base an investment decision. This is not a complete analysis of every material fact regarding any company, industry, or security. Additional analysis would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any particular client and is not presented as suitable to any other particular client. Past performance does not guarantee future results. All investments carry some level of risk, including loss of principal.
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