The initial excitement around ChatGPT and other AI tools led to debates about the consciousness of generative AI models. However, as time has passed, the hype surrounding these tools has diminished as the flaws and limitations of AI-generated content have become more apparent. This shift has prompted discussions about the maturity of the AI industry and the practical adoption of AI technologies by companies to improve efficiency.
Companies are now focusing on incorporating AI into their operations to enhance productivity, rather than dreaming of a future where AI eliminates the need for human work entirely. In the investment world, this pragmatic approach has led to the emergence of high-yielding closed-end funds (CEFs) that aim to capitalize on AI gains. One example is the Virtus Artificial Intelligence & Technology Opportunities Fund (AIO), which offers a generous 9.1% yield.
AIO has consistently raised its dividend since its IPO in 2019 and has delivered strong total returns that track the performance of the tech sector. The fund’s strategy of selling shares methodically and distributing gains as dividends has provided investors with reliable income streams while capitalizing on the profits of tech investing. By focusing on companies that benefit from AI technology, such as NVIDIA and Microsoft in addition to non-tech companies like Eli Lilly & Co. and Hilton Worldwide Holdings, AIO has positioned itself to thrive in the evolving landscape of AI productivity gains.
As the AI hype cycle transitions into a period of actual productivity improvements, funds like AIO have outperformed the tech sector. This success, combined with the fund’s current 7% discount to net asset value, suggests that AIO’s approach is still undervalued despite its proven track record. With AI playing an increasingly significant role in various industries, investing in companies likely to benefit from this technology is seen as a lucrative opportunity for investors seeking to capitalize on the AI revolution.
While the concept of investing in AI-focused companies may seem straightforward, the key lies in selecting funds that have strategically positioned themselves to maximize gains from the AI revolution. By focusing on productivity improvements and ignoring the hype cycle, CEFs like AIO offer investors a practical and reliable means of profiting from AI technology advancements. In the evolving landscape of the AI era, these funds represent a solid investment opportunity for those looking to diversify their portfolio and generate steady returns.
