By Ambrose O’Callaghan
It is hard to go a day without catching a story on artificial intelligence (AI) and its potential economic and social impact. The development of AI became a major story in the investment landscape following the November 2022 release of ChatGPT. This sophisticated chatbot, which was developed by OpenAI, amazed laymen and vindicated those who had opined on the economic benefits that AI was sure to bring. Investors may ask: How can I take advantage of this trend?
AI is being utilized by companies across many industries and sectors, some of which may surprise investors. Indeed, investors who are hungry for AI exposure may have more AI in their portfolio than they anticipated. Today, I want to look at three Harvest ETFs funds that provide exposure to this burgeoning and surprisingly diverse technological subsector.
How AI is boosting the world’s biggest brands
Some of the world’s largest brands are turning to AI development to bolster their bottom line. McDonald’s is known around the world for its remarkably successful fast-food franchises. That has helped McDonald’s establish itself as one of the most valuable American brands, while the stock has delivered over 50 years of dividend growth.
In December 2023, McDonald’s announced that it was partnering with Alphabet to deploy generative AI beginning in 2024. According to the report, “thousands” of stores will receive hardware and software upgrades. By using generative AI, McDonald’s aims to serve “hotter, fresher food” to its many customers. This means that customers should expect more AI-driven automation at drive-throughs at McDonald’s and possibly other fast-food chains in the years ahead.
McDonald’s is one of the 21 equity holdings in the Harvest Brand Leaders Plus Income ETF (HBF:TSX). This ETF is built to deliver growth prospects and income from a diversified portfolio of leading companies. Units of this ETF have delivered annualized growth of 7.7% since inception.
AI is powering a revolution in technology
PricewaterhouseCoopers (PwC) recently released its predictions for the AI business in 2024. The marketing research firm predicts that “many companies will find attractive ROI from generative AI, but only a few will succeed in achieving transformative value from it.”
Nvidia is one company that has achieved transformative value due to the rise of generative AI. The company built on its decades of leadership in developing graphics processors for PCs. Nvidia’s graphics processors are now being used to power PC experiences with generative AI.
This transformative growth has been borne out in its recent earnings. Nvidia delivered record full-year revenues of $60.9 billion in 2023 – up 126% compared to the previous year. Moreover, GAAP net income and diluted earnings per share (EPS) soared 581% and 586%, respectively, to $29.7 billion or $11.93 per share. The company is projecting revenues of $24.0 billion for the first quarter of fiscal 2024, compared to its Q4 FY2023 revenue of $22.1 billion.
Nvidia is a holding in the Harvest Tech Achievers Growth & Income ETF (HTA:TSX), which allows investors to tap into leading companies to deliver both income and growth opportunities investors seek in technology. As of March 7, 2024 , this ETF has delivered annualized growth of 15% since inception. Moreover, HTA has delivered three consecutive years of monthly distribution increases (2021, 2022, and 2023). It last paid out a monthly distribution of $0.1200 to unitholders. That represents a current yield of 8.03% as at March 6, 2024.
The health care sector is also using AI to bolster its services
We have already learned how AI is being used to help with your food orders and how it is playing a key role in transforming creative industries. However, AI could also play a role in extending human life in the health care space.
Stryker is one of the largest medical technology companies in the world. Last year, the orthopedic device maker announced that it had created its own Stryker AI team following the September 2021 acquisition of AI company Guess Surgical. Some of the AI products Stryker already has on the market include the Stryker Mako robot, that is already in use in thousands of procedures in North America. It also plans to launch spine and shoulder applications for the Mako robot in 2024.
Investors can gain exposure to Stryker and other health care companies that are pushing into the AI space with the Harvest Healthcare Leaders Income ETF (HHL:TSX). This ETF offers a monthly stable cash distribution and growth opportunities from large-cap US healthcare leaders.
As of February 29, 2024, HHL has delivered annualized growth of 7.5% since inception. Moreover, it has delivered over $400 million in total distributions to unitholders over that same period. HHL last paid out a monthly distribution of $0.0583 per unit, which represents a current yield of 8.29% as at March 6, 2024.
Conclusion
As investors go on the hunt for AI exposure, there are many names that may not immediately come to mind, like the ones I have highlighted in this article. Top brands like McDonald’s are using AI to deliver hotter food to customers, while health care companies like Stryker use AI and robotics to improve and even save lives. Investors can get exposure to these top businesses and mega trends by targeting ETFs like HBF, HTA, and HHL. Better yet, these ETFs offer investors consistent and stead monthly cash distribution supported by the employment of an active covered call strategy.
Disclaimer
Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently, and past performance may not be repeated. The content of this article is to inform and educate and therefore should not be taken as investment, tax, or financial advice. The information is meant to provide general information for educational purposes. Any security mentioned herein is for illustration purposes and should not be taken as an invitation to purchase or sell such security. Image by freepik
