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 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.
Tesla TSLA CEO Elon Musk sold another $1 billion of stock in the electric-vehicle maker, according to Securities and Exchange Commission filings, to pay the taxes for the exercise of a 1.55 million share option. That should wrap up his preplanned stock sales for this year.
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.
The World Health Organization reported that the number of COVID-19 cases worldwide climbed 11% last week, with Europe having the highest infection rate of any region.
Stock futures ES00 NQ00 were flattish after a pause in the rally on Tuesday.
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.
Here are the top tickers on MarketWatch, as of 6 a.m. Eastern.
This tax maneuver from the 1990s is now helping Silicon Valley tycoons save tens of millions of dollars.
These brothers have re-gifted the same candy since 1987.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.
Top performers included oil producers, Moderna, Ford and Nvidia.
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.