Nothing against the Ark Innovation ETF (ARKK | ARKK Price Prediction), which is having a glorious year, now up more than 35% year to date and over 78% in the last two years. Undoubtedly, this current environment has been very kind to the disruptive innovators, including those that aren’t yet making a big profit.
While there have been subtle cracks in the growth trade in recent weeks, with the Nasdaq 100 slipping a bit off its high, thanks in part to pronounced weakness in some of the high-flyers that have flown a bit closer to earth of late, I still think the disruptive innovation and growth themes are worth sticking with for the next two to three years.
The Ark Innovation ETF might be worth buying on the dip, but there’s another ETF that looks enticing
Now, that doesn’t mean we won’t face increased turbulence and perhaps the odd scare here and there, but I do think that the longer-term trend seems to be a big friend of the growth names, especially those with more than their fair share of exposure to AI. As it stands today, shares of the Ark Innovation ETF are down close to 17% from their recent highs.
As Cathie Wood of Ark Invest makes the most of the recent pullback by adding to positions in some of her favorite names, I do think that shares of the Ark Innovation ETF could be a smart buy at around $76 per share, a level where I see some pretty robust support. That said, there is one active tech ETF that I think might also be worth careful consideration on the way down.
Though the Ark Innovation ETF does stand out as “growthier,” with more explosive upside potential, the shares are also more volatile, with a beta of 2.41, which suggests a much more turbulent ride than the S&P, especially when the market encounters a bit of a growth scare. Whether it’s too soon to be a buyer for such a hot innovation ETF remains up for debate. If we are in the earlier innings of an AI decline, I would personally be more inclined to reach for an ETF like the Goldman Sachs Future Tech Leaders Equity ETF (NYSEARCA:GTEK) despite the recent relative underperformance to Ark’s flagship fund.
Shares of the Goldman Sachs Future Tech Leaders Equity ETF are up just over 21% year to date and around 56% in the last two years, coming up well short of the Ark Innovation ETF (up 35% and 78%, respectively, as mentioned previously).
A different flavor of high-tech innovation for growth investors
Goldman Sachs Future Tech Leaders Equity ETF is an exciting tech ETF on its own, with exposure to many high-tech AI innovators, most of which boast market caps well below the $100 billion mark. The weighted average market cap is currently hovering around $72.4 billion at the time of this writing.
Undoubtedly, if you’re looking for smaller firms that could enjoy meteoric rises, perhaps sticking below such a valuation could allow for more considerable upside. And while mega caps (think the current tech leaders) will probably still do extraordinarily well as the AI, with a lower chance of falling flat, I do think that keeping tabs on some of the up-and-comers is well worth the while.
With a wealth of intriguing names, many of which capitalize on the AI uprising (semis and AI software), and active Goldman managers managing the fund, I’m inclined to view the Goldman Sachs Future Tech Leaders Equity ETF as a terrific supplement to the growth side of any portfolio.
Given the unique names within the ETF and the minimal overlap with the Ark Innovation ETF, I think buying the two together could offer a potent one-two growth punch. Both ETFs have an expense ratio of 0.75%, an active approach, and some of the smartest minds out there when it comes to early-stage innovation. But what if you can only pick one?
While I am a fan of the Ark Innovation ETF, I’d have to say the Goldman Sachs Future Tech Leaders Equity ETF gets a slight edge right here, at least in my opinion, primarily because of the significant exposure to the international emerging tech plays like SK Hynix, which I view as highly underrated.
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