This fund driven by artificial intelligence is ditching big tech. Here's what it's doing instead. – MarketWatch

The megacap tech stocks have had a solid if not spectacular 2021. Heading into the final days of the year, Google parent Alphabet GOOG has soared 67%, while Amazon.com AMZN has only gained 5%, as founder Jeff Bezos exited for quite literally greater horizons. The NYSE FANG+ XX:NYFANG index, which includes the five core FAANG stocks (Facebook, Amazon, Apple , Netflix and Google) plus a handful more including Nvidia and Tesla, has gained 19% — underperforming both the S&P 500 SPX and Nasdaq Composite COMP.
The artificial-intelligence Powered Equity ETF AIEQ seems to have caught on. It’s an exchange-traded fund that uses IBM Watson to pick stocks, and now it doesn’t have any of the megacap tech giants in its top 10 holdings. Jessica Rabe, co-founder of DataTrek Research, points out that as recently as September, Apple AAPL, Microsoft MSFT, Amazon and Alphabet were its top four positions, making up nearly a quarter of the exchange-traded fund. Even in November, Microsoft, Alphabet and Amazon accounted for about 15% of the fund. Now, only Apple of the FAANG stocks is in the portfolio.
What is the fund doing now? It still has a smattering of tech stocks in its top 10, led by microchip maker Advanced Micro Devices AMD, but also investments including diabetes monitoring system maker Dexcom DXCM and electrical-system maker Eaton ETN. There’s also a bit of a cybersecurity theme with both Palo Alto Networks PANW and Fortinet FTNT in its top 10.
“AIEQ has been diversifying its holdings in a host of industries and putting most of its capital to work. That’s in contrast to this past September, for example, when it placed more concentrated investments in well-known companies amid that choppy month for U.S. equities. This latest approach reflects the current positive investment environment with the S&P near record highs,” says Rabe.
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Apple AAPL is reportedly paying up to $180,000 to prevent employees from moving to tech rivals including Meta Platforms FB, according to Bloomberg News.
The trade deficit in goods ballooned by 17.5% in November, the Commerce Department reported. Retail inventories rose by 2%, and wholesale inventories rose by 1.2%, the same report said. Pending home sales data is due shortly after the open.
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The yield on the 10-year Treasury BX:TMUBMUSD10Y edged up to 1.52%. One big move was in European natural-gas contracts, with the lead U.K. contract GWM00 tumbling 5% as a combination of warmer weather, U.S. supplies and Norwegian output moved prices off recent highs.
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Steven Goldstein is based in London and responsible for MarketWatch’s coverage of financial markets in Europe, with a particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch’s economic, political and regulatory coverage. Follow Steve on Twitter: @MKTWgoldstein.

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