Hedge funds specializing in artificial intelligence (AI) investments are eyeing potential winners akin to industry titan Nvidia, as they seek to capitalize on the burgeoning AI market.
These funds are strategically placing their bets on companies demonstrating strong AI capabilities and disruptive potential.
Polar Capital’s AI hedge fund strategy
Polar Capital, a London-based fund management boutique, has unveiled its $448 million AI Fund in 2017, aimed at tapping into the transformative potential of AI technology. Unlike high-risk ventures, the fund adopts a more balanced approach akin to global growth or disruption funds.
Lead manager Xuesong Zhao emphasizes the importance of investing in companies beyond the traditional tech sector, akin to how Google and Amazon were identified before their meteoric rise.
Identifying potential beneficiaries
According to Zhao, identifying potential beneficiaries of AI requires scrutiny beyond mere claims of AI integration by companies. Criteria for selection include a robust data set, innovative use of AI within their respective sectors, and substantial monetization potential. Zhao remains optimistic about Nvidia’s prospects, considering it a pivotal player in pioneering AI capabilities.
WS Blue whale growth fund’s approach
Similarly, the £915 million WS Blue Whale Growth Fund, launched around the same time as Polar Capital’s AI Fund, adopts a selective strategy in its investments. With Nvidia and Microsoft as its top holdings, the fund focuses on companies actively benefiting from or driving AI innovation.
Manager Stephen Liu highlights Nvidia’s significant presence in the fund, reflecting its strategic importance in the AI landscape.
Key investment targets
Liu’s investment strategy revolves around identifying companies facilitating productivity and efficiency enhancements through AI-driven applications. Apart from Nvidia, companies like Microsoft, Adobe, and Meta have piqued the fund’s interest due to their vast data resources and potential for personalized advertisement delivery.
Market trends and cautionary measures
Despite the AI hype, Liu exercises caution regarding companies overly reliant on generative AI for chatbots or customer service improvements, deeming them potentially overhyped. This sentiment aligns with recent market trends, where hedge funds have favored tech giants like Alphabet, Microsoft, and Amazon over software companies focusing solely on AI integration.
Both Polar Capital’s AI Fund and WS Blue Whale Growth Fund have demonstrated robust growth over the past five years, showcasing the viability of their investment strategies. While Polar Capital’s AI Fund boasts a cumulative growth of 103.35% over five years, WS Blue Whale Growth Fund has achieved an impressive 82.46% growth during the same period
