After a substantial rally, Artificial Intelligence (AI) stocks are still reasonably valued, according to Johannes Jacobi, an AI specialist at Allianz Global Investors. In a conversation with Investment Officer Belgium, Jacobi emphasized that from an investment perspective, the valuations remain favorable, while other sectors are yet to catch up.
Allianz Global Investors› AI team focuses not only on technology but also on the entire value chain of Artificial Intelligence. While they have specific segments in their portfolio solely dedicated to technology, AI infrastructure, and applications, they also invest in companies that actively integrate AI into their day-to-day operations. This approach allows them to have two distinct segments in their portfolio.
One such interesting sector they invest in is healthcare, which is increasingly utilizing AI, along with the agriculture sector. Allianz’s AI strategy is implemented through its Luxembourg-domiciled Allianz Global Artificial Intelligence fund.
Need for a social contract
Regarding the sustainability challenges and risks associated with AI, particularly on the societal and ecological fronts, Jacobi shared a differing view. He stated that their fund is not classified as an Article 8 fund, and there is a common concern about the sustainability of AI companies. He raised the possibility of needing a social contract to address these challenges effectively. He cited Mark Zuckerberg of Meta, who has acknowledged that more regulation could be beneficial for the industry and could create more opportunities and chances for companies in a competitive landscape.
At present, the fund falls under Article 6 of the SFDR (Sustainable Finance Disclosure Regulation), but they plan to transform it into an Article 8 fund later this year.
The fund’s year-to-date performance stands at an impressive 40.23%. Though the peer group of AI funds is not yet significantly extensive, Jacobi mentioned that their reference index consists of 50% MSCI World and 50% MSCI Technology index. In terms of performance, Allianz Global AI outperforms its reference index as well as its peer group. Jacobi confidently expressed that he hasn’t seen any competitors in the market performing as well as their fund.
Quarterly results
Looking ahead, investors› attention is primarily focused on quarterly results. The coming days will witness various companies in the portfolio announcing their results, which may lead to increased volatility in that period. From a fundamental perspective, AI offers numerous opportunities, and the segments in which they invest show promising potential. Jacobi predicted an increase in data centers and machine learning initiatives. Furthermore, he emphasized that companies beyond the typical technology sector will need to embrace AI technology, including healthcare and industrial firms such as Schlumberger and others.
Top 5 positions:
1. Tesla Inc
2. Amazon.com Inc
3. ON Semiconductor Corp
4. Meta Platforms Inc Class A
5. Adobe Inc
(Source: Morningstar)
This article was originally published in Dutch and French on InvestmentOfficer.be.
- Year-to-Date: 40.23%
- 3-Year Annualized: 3.93%
- 5-Year Annualized: 9.02%
- 10-Year Annualized: - (fund was created in 2017)