The STOXX Artificial Intelligence (AI) suite currently consists of five indices and is used to capture the different aspects and development stages of the targeted theme.
STOXX AI index suite
- STOXX® Global Artificial Intelligence
- STOXX® World AC AI Market Leaders
- STOXX® Global AI Infrastructure
- STOXX® Global AI Adopters and Applications
- STOXX® Global Artificial Intelligence Innovators
The AI indices have been designed based on the STOXX Thematic Framework, which maps the life cycle of a theme and provides valuable insights into its evolution and potential.
A new STOXX whitepaper explores AI as an investment theme and discusses the STOXX Thematic Framework to understand the theme’s market segments, their position in the theme’s evolution lifecycle, and the construction of indices targeting the theme.
The authors, led by Helen Tesfaldet, Associate Director for Product Development at STOXX, expect to see a wide range of investment opportunities as the adoption of AI advances. These opportunities will be in market segments at the forefront of AI innovation, those supplying the essential hardware and services supporting this innovation, and those successfully incorporating these breakthroughs in their business operations, they write.
With the right systematic strategies, investors can gain exposure to the potential upside as the AI theme continues to evolve and expand across a wide range of industries.
The STOXX Thematic Framework
The STOXX Thematic Framework’s life cycle recognizes that there are four stages (Figure 1) in the evolution of a thematic concept:
- Ideation
- Innovation
- Commercialization
- Maturity
Market penetration is low in the early stages of development, and the availability of reliable datasets to detect relevant companies is limited. The opportunity for growth is significant, but so is the risk of noisier exposure. As the cycle evolves, the level of conviction in a theme grows and the thematic exposure is better measured as more observable data points emerge.
Figure 1: AI theme evolution through the STOXX Thematic Framework lens
With subthemes mapped along their maturity stage, and equipped with the right market segmentation, a systematic strategy can apply the most appropriate methodology to select the key constituents. The STOXX AI indices target those companies along three main tier groups: Pure Players, Diversified Players and Innovators and (Figures 1 and 2), through either revenue- or patents-based selection, or a combination of both. This strikes a flexible balance between purity of exposure and higher-growth opportunities. Market share, a company’s competitive position through its absolute revenues relative to industry peers, is also another useful metric that is used to identify Market Leaders.
Figure 2: The STOXX Thematic Framework – A tier-based construction structure
All five STOXX AI indices focus on the same theme, but address different aspects of it and various stages of its development. The indices target the two main groups along which STOXX categorizes AI subthemes: AI Infrastructure, which consists of the fundamental components (such as semiconductors, cloud computing and big data technologies), and AI Applications, which represents the main application areas.
According to the BlackRock Investment Institute, annual investment into AI data centers and chips could surpass USD 700 billion by 2030.[1] UBS expects revenues from the AI applications and models segment — including AI software assistants, AI advertising, AI cloud and models, and others — to grow from USD 2.2 billion in 2022 to USD 225 billion in 2027 – a compound annual growth of 152%.[2]
Figure 3: STOXX AI index suite – composition profile
Finally, the whitepaper provides a comprehensive overview of the effects of all methodology considerations, covering issues such as industry and factor exposures, and risk and return profiles. We invite you to download the study here and read more.
[1] Source: BlackRock Investment Institute, “Investment perspectives,” November 2024.
[2] Source: UBS, “TechGPT: Raising AI revenue forecast by 40%.”