BlackRock’s Rachel Aguirre on the best ways to invest in AI

Asked on this week’s Opto Sessions to name her expected trend for the future, Rachel Aguirre, head of US iShares product at BlackRock, highlights the enormous potential of artificial intelligence (AI), and explains how investors can gain exposure.

AI is not under-reported, admits Rachel Aguirre this week on Opto Sessions. The head of US iShares product at BlackRock does, however, believe that it is under-invested.

“It’s been blasted all over the news, people are talking about it non-stop,” she says. “We know that AI has the potential to completely up-end and disrupt many parts of the economy. But I actually don’t think that investors have fully seized the opportunities that exist in this space yet.”

She cites Bloomberg Intelligence estimates which see the generative AI market growing to $1.3trn by 2032, having stood at $40bn last year. While this is impressive growth in its own right, Aguirre highlights the fact that generative AI is in many respects only the tip of the iceberg.

“Whether we’re talking about self-driving cars or innovative healthcare, AI is going to further expand the market opportunity,” she says.

The diversity of themes that AI is likely to benefit means that there are a number of different ways in which different companies will capture the tailwinds that the technology provides. 

According to Aguirre, these include companies that produce AI technology themselves, as well as those producing AI-enabling technologies, such as cloud providers or semiconductor manufacturers.

“It’s really the entire value chain where we see a tremendous opportunity here,” says Aguirre. 

Investing across the value chain

BlackRock offers the iShares Robotics and Artificial Intelligence Multisector ETF [IRBO], a passive ETF that tracks the NYSE FactSet Global Robotics and Artificial Intelligence Index. Aguirre calls IRBO “a great way to do a pure play in this space”.

The fund highlights a balance that Aguirre says her team is constantly seeking to strike: between the purity of exposure to a theme on the one hand, and capturing the entire value chain of a theme on the other. She demonstrates the trade-off by using the analogy of the electric vehicles (EVs) theme.

“We believe there’s going to be this massive adoption of EVs,” she says. “It’s not only the vehicle producers themselves that stand to benefit from a trend like that. For the investor, we want to make sure that what we’re capturing is also the underlying component parts that will be required, or some of the aspects of the underlying materials that will be needed. That’s what we mean when we say investing in the entire value chain.”

For less direct exposure, BlackRock also offers the iShares Semiconductor ETF [SOXX], another passive fund that tracks the ICE Semiconductor Index. This, says Aguirre, offers investors access to “the value chain of AI”. 

Investing into rapidly changing themes like AI highlights the advantages of combining passive and active investment strategies. 

“Systematic, rules-based indexes are able to capture very dynamic and evolving themes and trends. At the same time, we are also big believers in the active approach, in terms of being agile, nimble, having that overlay of discretion and tapping into our deep expertise and research into these themes as well.”

FuboTV to reinvent live TV

IRBO is up 37.4% year-to-date, with the media hype that Aguirre mentions around the space clearly being a tailwind. 

Its second-largest holding, as of 17 July, is sports streaming platform FuboTV [FUBO]. Though at first glance an unlikely stock to top an AI and robotics ETF, Fubo acquired AI-powered computer vision platform in December 2021, and announced in May this year that it intends to make AI its primary focus for the remainder of the year.

Since its first quarter results declared the company will “build a completely new way for consumers to engage with and watch live TV”, Fubo’s share price has rocketed 94.6%.

IRBO’s top holding is Faraday Technology Corporation [3035.TW], a provider of intellectual property for advanced chips. Faraday’s share price has gained 137.3% in the year so far

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