Given the near-universal adoption of AI-driven services with immense growth potential, it’s no wonder that market participants have been piling up conviction into stocks with high “AI-relevant” exposure. It is entirely feasible to create a “basket” of stocks that capture most major aspects of AI adoption within a limited number of stocks.

AI services aren’t just about the algorithm. Effective deployment is often predicated on an effective processor. While microchip development has increasingly centered around AI-relevant architecture, there are a few industry leaders in the present: Nvidia inc (ticker: NVDA), Advanced Micro Devices Inc (ticker: AMD), and Qualcomm Inc (ticker: QCOM) are widely considered to be running at the forefront of AI-relevant hardware design while Taiwan Semiconductor Manufacturing Company Limited (TPE ticker: 2330) is presently considered to be the world’s most prominent foundry for the manufacturing of microchips. Intel inc (ticker: INTC), meanwhile, can be considered as both designer and manufacturer – around 75% of Intel’s chips are manufactured in fabrication plants in Oregon and Arizona. Similarly, Arm Holdings (ticker: ARM) is a British semiconductor and software design company increasingly catering around an AI strategy.

On the “algorithm” side of the business, Big Tech is very prominent: Amazon Inc (ticker: AMZN), Microsoft Inc (ticker: MSFT) and Alphabet Inc (ticker: GOOGL) offer “on-demand” cloud-based computation platforms and infrastructure to corporations while Alibaba (ticker: BABA) does the same predominantly in China. Apple (ticker: AAPL) doesn’t currently have an AI offering yet, it incorporates AI extensively in its products and is expected to make some major inroads via a new “AI strategy”² in 2024. Similarly, Meta Inc’s (ticker: META) Meta AI is working on developing various forms of artificial intelligence, developing augmented and artificial reality technologies. Another prominent (and arguably the most secretive) AI services provider is, of course, Palantir.

Given the price performance of many of these tickers tend to be rather extreme on many an occasion, a time-tested approach to handling this would be to weigh each of these stocks (or their American Depositary Receipts) equally. Each of these tickers – one per company – would thus have a weight of approximately 7.69%.

In the Year Till Date (YTD), the price performance of this equal-weighted “AI” basket versus the broad-market S&P 500 (ticker: SPX) and the tech-heavy Nasdaq-100 shows the former having a clear and massive lead.