AI, tech plays for 2023’s second half

Investors may want to stick with what is working in the market.

ETF experts Todd Sohn and Dave Nadig of VettaFi believe that the second half of the victory is for technology and artificial intelligence plays.

Sohn, Strategas’ ETF and technical strategist, specifically the Roundhill Generative AI and Technology ETF (CHAT).

“What I like [CHAT] so it’s actively managed,” Sohn told CNBC’s “ETF Edge” this week. “It’s my preferred route if you want to get exposure to AI and see how real the demand is.”

CHAT is up more than 10% so far this year.

Sohn also recommends the Global X Robotics & Artificial Intelligence ETF (BOTZ) for those interested in introducing multiple industries to their portfolio. BOTZ is up more than 37% year to date.

“I like it [BOTZ] if you want to stay away from tech you already have tech exposure in your portfolio. Industrialists are also beneficiaries,” he said.

Nadig, VettaFi’s financial futurist, also sees benefits from exposure to AI. However, he suggests that the upside has its limits.

“AI will have a long-term and significant positive impact on GDP… [But] it’s very difficult to choose public companies that will be the outsized beneficiaries of that,” Nadig said. “We run into this all the time when we have new technology … and we end up buying Google and Microsoft and Apple and Nvidia, which we all probably already own.”

He predicts industrials, robotics and automation are positioned for the biggest gains.

Both Nadig and Sohn advocate ETFs for those who believe the market will expand to include sectors beyond technology.

Sohn recommends the Invesco S&P 500 Equal Weight ETF (RSP) and the Vanguard Extended Market Index Fund (VXF), while Nadig suggests the JPMorgan Equity Premium Income ETF (JEPI). All three generated positive returns this year.

“Playing a little bit more defense the rest of this year as opposed to trying to chase technology is probably the way to go,” Nadig said. “[JEPI] a large flow collector; it’s a given for investors… Something like extended market or equal weight exposure is a good way to try to get back if you don’t have that [tech] rally so far this year.”