How To Construct An AI Portfolio

A look at last Thursday’s and today’s Trackstar top five reveals that individual investors and financial professionals appear to be on the same page in at least one area. 

Check out Thursday’s Juice for the latest on the nation’s housing crisis after you read today’s Juice on how to construct an artificial intelligence (AI) portfolio. 

Or we should say, one way to construct an AI portfolio. 

We have been talking about portfolio diversification a lot lately. And, let’s face it, it’s a subject that gets surface level treatment that is also, for most of us, a work in progress. There’s no shame in admitting that. 

It’s tough to truly diversify your portfolio. And how do you really know when you’re there anyway? 

Because it’s a complex, yet imperfect science, most financial media and investing gurus ignore the nuance. We think it’s more helpful to make it an ongoing narrative we continue to advance and assess from different perspectives. 

For example, what we said about the construction of our overall portfolio the other day applies to AI (or any other specific sector or theme, for that matter):

We have the broad market ETFs alongside an even distribution of different types of dividend stocks, via ETFS and individual stocks and a dabble in AI via an ETF.

You can do likewise with the focus being — let’s call it — the AI section of your portfolio. The beauty of a space like AI is that it lends itself to so many areas of investing. 

You get to buy AI pioneers and powerhouses who are big players beyond artificial intelligence. Many of these are legacy companies that pay dividends. Plus, you get to speculate a little. Every portfolio should make some room for speculation. With so many people looking for the next big AI stock, yes, it absolutely makes sense to take a shot as long as you cover all of your bases. 

So let’s generally illustrate what we mean here. 

Nvidia (NVDA) and Advanced Micro Devices (AMD) occupy the #1 and #5 spots, respectively, in Trackstar for both retail investors and financial pros. Makes sense, because they, along with Broadcom (AVGO), are among the core holdings in any AI portfolio. 

We know all about NVDA. And, even though it’s up roughly 82% YTD, after running about 220% over the last year, we think it still has room to run. 

But don’t ignore AMD. 

Its data center business, which has an AI focus, grew revenue by 38% in the most recent quarter. And the company is a major player in another AI area set to explode — AI-equipped PCs.

AMD is up approximately 23% this year and around 78% over the last year. 

Meanwhile, AVGO is up by about the same amount YTD and around 111% over one year’s time. Broadcom expects to grow its AI chip revenue by 140% year over year, expanding sales to north of $10 billion. 

Of course, you can buy these stocks individually and/or go with one of our favorite AI plays, the VanEck Semiconductor ETF (SMH). In it, you’ll get passive access to a semiconductor index, of which NVDA has a 20.2% weight in, making it the top holding. AVGO is the third biggest name at 7.9%. AMD comes in tenth at 4.3%. 

From there, big tech, from Microsoft (MSFT) to Meta Platforms (META) and Apple (AAPL) to Google (GOOGL), can comprise the hearty middle, getting you a few dividends and broad access to tech and the US economy in the process. 

From there, you speculate a little. Exactly how you do that is up to you. But, the key is finding hidden gems with sound, long-term narratives. Companies with real futures in AI, not adjacent floaters. 

For a different, but related in theory example, The Juice has done well with DoorDash (DASH). Not necessarily an obscure name, but it often doesn’t rank high in Trackstar. So it’s not big on many investors’ radars. Yet, it’s a solid consumer ecosystem play, following the Amazon.com (AMZN) playbook to an extent, that’s up 41% YTD and 115% over the last year. 

It’s not Amazon, just like the AI stocks you might speculate on aren’t Microsoft or Apple. But it has a real foothold in a space you can understand and appears able to stand the test of time. 

The Bottom Line: Ultimately, you want to build a core of solid AI names via ETFs and stocks. We gave you a few ideas in today’s Juice. 

Then, to round out the AI section of your portfolio (and get closer to diversification in the space and in your overall slate of holdings), you speculate on an under-the-radar name or two that isn’t a fly-by-night AI stock, but one that appears ready to stand the test of time alongside or, who knows, in consolidation with the big boys. 

Expect the big players to gobble up some of these smaller ones (as is already happening), which has the potential to make AI investors a lot of money.

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