Why Did an AI-Powered ETF Sell Nvidia Stock?

Introduction

In a recent episode of ETF.com's weekly video series, senior analyst Sumit Roy spoke with Francis O, the APAC CEO of Craft Technologies, about the Craft AI Enhanced US Large Cap ETF. This ETF, with the ticker symbol QRF, utilizes artificial intelligence to actively manage investments and claims to have outperformed the S&P 500 index consistently since its inception.

Mechanics of the QRF ETF

Launched in May 2019, QRF is categorized as an actively managed ETF, employing AI not only for selecting thematic stocks but also for predicting market trends and stock movements. The AI models integrated into the ETF analyze vast amounts of data, including macroeconomic trends and time-series market data. According to Francis, QRF has demonstrated robust performance, consistently outperforming traditional S&P 500 tracking ETFs by over 10 percentage points since its launch.

The Decision to Sell Nvidia

One notable event discussed was the ETF's decision to divest Nvidia stock. Throughout 2019, QRF had maintained a position in Nvidia, but the fund's AI model adjusted its view throughout 2024. The ETF's model lowered Nvidia’s weight to 0.6% in June of this year and entirely divested from the stock in August. Francis explained that such a decision might be perceived as bold or unusual for a human portfolio manager. However, QRF's AI-based decision-making process relies on data-driven insights, leading to this strategic exit based on deteriorating market sentiment around Nvidia and broader economic concerns.

Integration of Advanced AI Techniques

Francis emphasized that the ETF's application of AI goes beyond traditional methods. While large language models (LLMs) have gained significant attention in recent years, Craft Technologies continues to refine its AI strategies, incorporating advanced techniques like deep learning and Transformer engines. Despite the changing landscape of AI technology, QRF remains focused on leveraging AI to enhance its academic factor models and mitigate human emotional biases in investment decisions.

Market Reception and Future Potential

Despite its impressive performance, QRF has faced challenges in attracting substantial assets, currently standing at approximately $ 15 million under management. Francis noted that while acceptance of AI in broader society has been gradual, interest in AI-powered ETFs is increasing. He pointed out that QRF has already doubled its assets since the end of the previous year, indicating growing investor interest. As more stakeholders look into actively managed ETFs with proven track records, the potential for Craft's AI-driven strategies may grow stronger.

In summary, Francis's insights reveal a well-thought-out approach to leveraging AI in asset management while navigating the complexities of investor reception.

Keywords

• AI-powered ETF
• Craft Technologies
• QRF
• Nvidia
• Active Management
• Stock Predictions
• Deep Learning
• Outperformance
• Market Sentiment
• Investor Reception

FAQ

What is the Craft AI Enhanced US Large Cap ETF?
The Craft AI Enhanced US Large Cap ETF (QRF) is an actively managed ETF that employs artificial intelligence to select stocks and predict market trends.

Why did the ETF sell Nvidia stock?
The ETF divested from Nvidia based on its AI model's assessment of deteriorating market sentiment and economic concerns. It reduced Nvidia's weight to 0.6% and eventually sold all positions by August 2024.

How has QRF performed since its inception?
Since its launch in May 2019, QRF has consistently outperformed the S&P 500 tracking ETFs by over 10 percentage points.

What advanced AI techniques does QRF utilize?
QRF leverages deep learning and Transformer engines as part of its AI strategy, enhancing the academic factor model while minimizing human emotional biases in investment decisions.

Why does QRF have low assets under management?
Despite its robust performance, QRF has faced challenges in gaining significant assets, currently standing at around $ 15 million. However, it has doubled its assets over the past year as investor interest in AI-driven investments grows.