10 mutual funds with the maximum exposure to AI stocks

Today, AI has revolutionised several areas of our lives without us even realising it. From YouTube recommendations to Grammarly and ChatGPT, AI has become accessible to everyone.

As per PwC, AI will contribute $15.7 trillion to the global economy by the end of the coming decade! To put things into perspective, if AI were a country, it would have the third-largest economy in the world by 2030, bigger than India and behind only the US and China.

Given AI is tipped to be a generational gamechanger, why should we - the Indian investors - miss out on investing in them?

Joining the AI bandwagon

But first, let's identify what we mean by AI stocks by citing a Motley Fool article titled 'Trillion-dollar wealth shifts: from the Internet ... to smartphones ... to AI'. In this article, they identified eight companies as part of the AI pack:

• Alphabet (Google)
  
• Amazon
  
• Advanced Micro Devices (AMD)
  
• ASML Holding N.V.
  
• Meta (Facebook)
  
• Intel
  
• Microsoft
  
• NVIDIA

Although none of these 'AI companies' are based in India, various Indian mutual fund schemes - active and passive - invest in them.

Passive funds
Let's look at the ETFs and index funds that have substantial investments in these eight AI stocks by virtue of the index composition they replicate:

Active funds
Even active funds - schemes with a fund manager to do their stock picking - have poured large amounts of Indian investors' money into the eight AI stocks.

In fact, the number of such schemes exceeds double digits.

But, as shown in the below graph, the AI investment is highly concentrated among a few funds, with the top five having an 88 per cent share of the total investment worth Rs 12,011 crore. These five funds are:

• Parag Parikh Flexi Cap Fund
  
• SBI Focused Equity Fund
  
• SBI Flexicap Fund
  
• SBI Magnum Global Fund
  
• ICICI Prudential US Bluechip Equity Fund

Note: The figures are rounded off to the nearest whole number. The list excludes Fund of Funds (FoFs). Alphabet's (Google) Class A and Class C shares are considered. Scheme holding as of October 31, 2023.

There are two observations from the above graph:

• One, there is a preference for Alphabet (Google), with four of the five schemes having invested in the California-based tech titans.
  
• Two, none of the five funds currently have holdings in NVIDIA stocks.

Key takeaways

You can own AI stocks via two routes:

• First is through ETFs and index funds tracking the US-based NASDAQ index. They provide a broader exposure to all the eight AI stocks. (Our readers may know that we recommend NASDAQ for investors seeking geographical diversification.)
  
• The second is through active funds. But consider them only if you have a more focused investment strategy.

While our study did not include Fund of Fund schemes, it's worth noting that investors could explore this option.

Also read: Is it a good time to invest in tech funds?