Palantir and Duolingo: The AI Powerhouses Driving AGIX’s Success
The KraneShares Artificial Intelligence and Technology ETF (Ticker: AGIX) has demonstrated impressive performance since its inception on July 18, 2024, with a total return of 13.48%.1 This outpaces other significant market benchmarks and AI-themed indexes.
KraneShares also hosted a Nasdaq Bell Ringing and AI Investor Day, where industry leaders from Perplexity, Anthropic, Palantir, and Duolingo came together to discuss the future of artificial intelligence, its impact on the investment landscape, and the launch of AGIX. Watch our highlight reel below.
Performance Comparison
Selection Methodology:
AGIX invests in an AI basket that captures the whole AI value chain, from large language model (LLM)-centric hardware and data centers to AI infrastructure, deployment, and applications.
The fund's selection process involves several key steps:
- Initial Universe: The process starts with over 2,000 companies.
- Eligibility Criteria: Companies must have a minimum free float market capitalization of $2 billion and a minimum average daily trading value of $2 million.
- AI Score: A proprietary scoring system powered by large language model native engineers and investors to assess each company's relevance to and readiness for artificial intelligence technology.
This score considers factors such as:
- AI revenue
- Visibility of AI revenue
- Evolution of AI products
- Potential for AI to transform or be incorporated into a company's business model
The fund's AI scoring system has effectively identified companies that have benefited from AI while excluding companies lagging in the AI era.
Top 2 AGIX holdings overweights contributing to the outperformance of the Nasdaq 100:
Palantir: High AI Score in AGIX. Strong AI adoption is expected in both the government and commercial sectors. Palantir offers a powerful AI platform (AIP) that enables enterprises to deploy large language models on proprietary data with robust security, access controls, and auditing capabilities. The company has demonstrated significant success in implementing AI solutions for major clients, resulting in improved supply chain efficiency, increased sales, and expanded profit margins.
Duolingo: High AI Score in AGIX. Duolingo leverages AI to deliver personalized language learning experiences, using technologies like GPT-4 to power innovative features such as "Explain My Answer" and "Roleplay" that provide instant feedback and immersive practice. The company employs AI throughout its platform to adapt lessons to individual learners' abilities, offer real-time corrections, and create engaging content more efficiently, allowing for rapid course development and expansion. Duolingo's commitment to responsible AI use, coupled with its data-driven approach to improving educational outcomes, has positioned it as a leader in AI-powered education, making high-quality language learning accessible to millions of users worldwide.
Top 2 AGIX holdings exclusions contributing to the outperformance of the Nasdaq 100:
Intel: Low AI Score in AGIX. Intel's lag in the AI era stems from its failure to recognize the importance of GPUs for AI workloads and its late entry into the AI chip market. The company's focus on traditional CPUs and manufacturing delays have left it trailing behind competitors like Nvidia and AMD.
Applied Materials: Low AI Score in AGIX. Applied Materials is lagging in the AI era due to its heavy reliance on non-AI chip markets, which are experiencing a significant decline in demand.
2025 AI Market Outlook
As we look ahead to 2025, the AI sector is poised for significant growth, driven by several key catalysts:
Enterprise AI Adoption: 2025 will likely mark a turning point in enterprise AI adoption, with organizations moving beyond experimentation to implement production-scale AI solutions. There will be widespread deployment of generative AI for content creation and process automation, integration of AI into core business workflows and decision-making processes, and growing demand for industry-specific AI solutions in retail, healthcare, finance, manufacturing, etc.
Infrastructure Expansion: We anticipate a substantial increase in AI infrastructure investments, with major cloud providers and enterprises ramping up their data center capabilities. By 2025, global corporate capital expenditures in the AI cloud field are projected to exceed USD 250 billion.2 Increased focus on edge infrastructure for faster, more efficient distributed AI processing.
For AGIX top 10 holdings, risks, and other fund information, please click here.
Citations:
- Data from Bloomberg as of 12/31/2024.
- Data from Morgan Stanley as of 10/17/2024.
Index Definitions:
Morningstar Global AI Index: The Morningstar Global Artificial Intelligence Index is designed to deliver unparalleled, thematically pure exposure to leading-edge artificial intelligence technologies, including generative artificial intelligence and adjacent products and services, by drawing on the in-depth knowledge and forward-looking insights of Morningstar’s equity research team.
S&P 500 Index: The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.
Nasdaq 100 Index: The Nasdaq-100 is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. It is a modified capitalization-weighted index.
US Listed Semiconductor 25 Index: The MVIS US Listed Semiconductor 25 Index (MVSMHTR) is a modified market cap-weighted index that tracks the performance of the 25 largest and most liquid US exchange-listed semiconductor companies.
Indxx AI and Big Data Index: The index is designed to provide exposure to exchange-listed companies that are positioned to benefit from the further development and utilization of artificial intelligence technology in their products and services, as well as to companies that provide hardware which facilitates the use of artificial intelligence for the analysis of big data.
