Investing into an AI future: BlackRock's Jacobs talks ETFs

US equity markets (^DJI, ^IXIC, ^GSPC) have gained quite a lot of ground in 2024 year-to-date, with much of their rallies thanks in part to semiconductor and chip stocks like Nvidia (NVDA).

BlackRock US Head of Thematic and Active ETFs Jay Jacobs sits down with Brad Smith on Wealth! as part of Yahoo Finance's ETF Report to discuss several of BlackRock's notable iShares ETFs in relation to the growing AI landscape and the energy and digital infrastructure demands that come with mass adoption.

"What we're focused on is really... the picks and shovels in artificial intelligence. So we believe there's going to be more adoption of AI, full stop. It's a huge technology, it's transformational," Jacobs says. "We believe that about [of] 5% enterprise adoption that we see today is going to move to 80% adoption in the next few years."

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Luke Carberry Mogan.

Video transcript

Stocks are mixed about 90 minutes into the trading day.

The Dow and the S and P 500 both trading a little bit lower here, the NASDAQ holding on to gains though right now.

But off of today's session, high stocks have been doing well all in this year in large part due to strength in NVIDIA, over 38% of the S and P five hundred's gains so far are due to semiconductors also known as the chips that power Artificial Intelligence and a bunch of other things.

So is there more room to run for the A I trade this year to discuss how you can set yourself up for success in the second half of the year?

We've got good friend of the show.

Jay Jacobs Blackrock us head of thematic and active ETF S here as part of the ETF report brought to you by invest QQQ.

Jake.

Great to see you here today.

Great to be back, Brad.

Absolutely.

So let's let's dive into this.

I mean, when you have so much of the market's gains thus far, concentrated in one core theme, what does that mean for potential broadening and what etfs could investors consider adding to their portfolio if that broadening does start to take even more shape?

I think investors have to look at the big picture with artificial intelligence and really try to understand what's the next shoe to drop.

What's the next part of the market that could see similar run ups that we've already seen thus far in some segments of A I. Um What we're focused on is really what are the picks and shovels in artificial intelligence.

So we believe there's gonna be more adoption of A I full stop.

It's a huge technology.

It's transformational.

We believe that about 5% enterprise adoption that we see today is gonna move to 80% adoption in the next few years.

But what are the companies that no matter whether you go with cloud, whether you go with chat GP T, no matter what A I platform you go with are going to benefit from this build out.

And what we see is about a trillion dollars that has to be spent on A I infrastructure that is digital infrastructure, that's like data centers and cell towers which you capture in our ID GT ETF.

Uh that's semiconductor companies and not just GP U manufacturers but a broader ecosystem of semiconductors that we capture with our Sox ETF.

So it's really focused on that next layer, the picks and shovels that will benefit from the build out of this core technology.

And so where does that point investors towards is it things like everything that has to power the data centers.

For instance, you think about utilities, you think about the need for even more cyber security as well around some of these data centers too.

Absolutely.

I think energy is a really important aspect here because you're going to see a massive incremental demand for energy, not just from artificial intelligence, but you think about the growth of electric vehicles.

Uh You think about renaissance and us manufacturing that we're seeing recently as well as driving energy demand.

So our electrical grid and power generation just isn't really designed to see 2% 3% compound annual growth.

Meanwhile, I'm getting texts to turn down my thermostat or my ac and knowing all these data centers are going to be built up tapping the grid too.

So that's the point right is that we don't have capacity yet to build more electric generation.

So this is going to impact the whole energy infrastructure.

This is going to mean more generation is going to mean upgrading power lines.

One of the key components that I think the market doesn't quite recognize yet is copper, whether you are building renewables, whether you are building transmission lines, whether you're building data centers, all roads lead through copper and it's already a metal that's in uh structural undersupply.

So this could be a choke point within the physical build out of A I and energy.

Is there a commodity or copper kind of ETF play that investors, you've seen some volume kind of clearly flowing into.

Yeah.

Well, we've seen an uptick in our copper miner, a TF IC OP op and it's specifically for that reason, these are the companies that are taking copper out of the ground and making it usable in things like power transmission.

All right.

Some of the original mining and then ultimately putting that to use here.

Thank you so much, Jay Jay Jacobs Blackrock us head of thematic and active ETF s great to see you.

I don't know if you get those texts too about turning down your, the, it, it hits me a little bit harder.

Sometimes I'm just like come on, text, text the companies across the street from me, commercial real estate.

It was a tough week for that.

It is great to see you, man.

Good to see you.