State Street is reiterating its bullish stance on the artificial intelligence (AI) trade despite the Nasdaq experiencing its worst week since April.
According to the firm’s chief business officer, Anna Paglia, momentum stocks still have legs because investors remain reluctant to step away from the growth story that has driven gains throughout the year.
“How would you not want to participate in the growth of AI technology? Everybody has been waiting for the cycle to change from growth to value. I don’t think it’s happening just yet because of the momentum,” Paglia told CNBC’s “ETF Edge” earlier this week. “I don’t think the rebalancing trade is going to happen until we see a signal from the market indicating a slowdown in these big trends.”
Paglia, who has spent 25 years in the exchange-traded funds (ETF) industry, sees a higher likelihood that the space will cool off early next year. “There will be much more focus about the diversification,” she said.
State Street manages several ETFs with exposure to the technology sector, including the SPDR NYSE Technology ETF, which has gained 38% so far this year as of Friday’s close. However, the fund pulled back more than 4% over the past week as investors took profits in AI-linked names.
The fund’s second-largest holding as of Friday’s close is Palantir Technologies, according to State Street’s website. The stock, which reported earnings on Monday, tumbled more than 11% this week. Yet, Paglia reaffirmed her bullish tech view in a statement to CNBC later in the week.
Meanwhile, Todd Rosenbluth points to a rotation that is already beginning to take hold in the market, highlighting renewed appetite for health care stocks.
“The Health Care Select Sector SPDR Fund, which has been out of favor for much of the year, started a return to favor in October,” the firm’s head of research said during the same interview. “Health care tends to be a more defensive sector, so we’re watching to see if people continue to gravitate towards that as a way of diversifying away from some of those sectors like technology.”
The Health Care Select Sector SPDR Fund, which has underperformed the technology sector this year, is up 5% since October 1. It was also the second-best performing S&P 500 group this week.
https://bitcoinethereumnews.com/tech/ai-big-tech-bull-case-despite-nasdaqs-worst-week-since-april/