This fund driven by artificial intelligence is ditching big tech. Here’s what it’s doing instead. – MarketWatch

The megacap tech stocks have had a solid if not spectacular 2021. Heading into the final days of the year, Google parent Alphabet GOOG, +0.04% has soared 67%, while Amazon.com AMZN, -0.86% has only gained 5%, as founder Jeff Bezos exited for quite literally greater horizons. The NYSE FANG+ NYFANG, -0.81% index, which includes the five core FAANG stocks (Facebook, Amazon, Apple , Netflix and Google) plus a handful more including Nvidia and Tesla, has gained 19% underperforming both the S&P 500 SPX, +0.14% and Nasdaq Composite COMP, -0.10%.

The artificial-intelligence Powered Equity ETF AIEQ, +0.35% seems to have caught on. Its an exchange-traded fund that uses IBM Watson to pick stocks, and now it doesnt have any of the megacap tech giants in its top 10 holdings. Jessica Rabe, co-founder of DataTrek Research, points out that as recently as September, Apple AAPL, +0.05%, Microsoft MSFT, +0.21%, Amazon and Alphabet were its top four positions, making up nearly a quarter of the exchange-traded fund. Even in November, Microsoft, Alphabet and Amazon accounted for about 15% of the fund. Now, only Apple of the FAANG stocks is in the portfolio.

What is the fund doing now? It still has a smattering of tech stocks in its top 10, led by microchip maker Advanced Micro Devices AMD, -3.19%, but also investments including diabetes monitoring system maker Dexcom DXCM, +1.11% and electrical-system maker Eaton ETN, +0.30%. Theres also a bit of a cybersecurity theme with both Palo Alto Networks PANW, -0.20% and Fortinet FTNT, +0.20% in its top 10.

AIEQ has been diversifying its holdings in a host of industries and putting most of its capital to work. Thats in contrast to this past September, for example, when it placed more concentrated investments in well-known companies amid that choppy month for U.S. equities. This latest approach reflects the current positive investment environment with the S&P near record highs, says Rabe.

Tesla TSLA, -0.21% CEO Elon Musk sold another $1 billion of stock in the electric-vehicle maker, according to Securities and Exchange Commission filings, to pay the taxes for the exercise of a 1.55 million share option. That should wrap up his preplanned stock sales for this year.

Apple AAPL, +0.05% is reportedly paying up to $180,000 to prevent employees from moving to tech rivals including Meta Platforms FB, -0.95%, according to Bloomberg News.

The trade deficit in goods ballooned by 17.5% in November, the Commerce Department reported. Retail inventories rose by 2%, and wholesale inventories rose by 1.2%, the same report said. Pending home sales data is due shortly after the open.

The World Health Organization reported that the number of COVID-19 cases worldwide climbed 11% last week, with Europe having the highest infection rate of any region.

Stock futures ES00, -0.05% NQ00, -0.07% were flattish after a pause in the rally on Tuesday.

The yield on the 10-year Treasury TMUBMUSD10Y, 1.545% edged up to 1.52%. One big move was in European natural-gas contracts, with the lead U.K. contract GWM00, +1.21% tumbling 5% as a combination of warmer weather, U.S. supplies and Norwegian output moved prices off recent highs.

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This fund driven by artificial intelligence is ditching big tech. Here's what it's doing instead. - MarketWatch