Purpose Investments Inc. is launching two single-stock exchange-traded funds (ETFs) looking to capitalize on growth in the AI sector. 

The Toronto-based investment services company on Thursday announced its new NVIDIA Yield Shares Purpose ETF and the Microsoft Yield Shares Purpose ETF on Thursday.

The indexes, listed on the Cboe Canada exchange, aim to offer targeted exposure to Nvidia Corp. and Microsoft Corp, two companies that have benefited from skyrocketing investor appetite for game-changing artificial intelligence technology.

“We’re in the midst of the next technological revolution with AI, and Nvidia and Microsoft are at the forefront of this movement,” Vlad Tasevski, head of asset management at Purpose Investments, said in a Thursday press release.  

Purpose Investments said the ETFs are denominated in Canadian dollars, which hedge the U.S. dollar to reduce currency fluctuation risks. 

Tasevski said the new offerings represent his company’s belief in its Yield Shares asset class. He said the new ETFs should offer an “enhanced monthly yield” that would be greater than dividends declared on the underlying stock. 

“We’re thrilled to offer Canadian investors an additional way to get complementary exposure to leading technology names while enhancing their monthly distributions,” Tasevski said. 

AI BOOM

Nvidia and Microsoft have been big names for AI investors over the past year. Both are players in producing the chips that are essential for developing AI tech.

Last November, Microsoft announced its first custom-designed AI cloud chips to increase its offerings in the AI market. The company had also announced new software that allows clients to design AI assistants.

Nvidia also benefited from AI sentiment last year, becoming the first chipmaker to reach a US$1 trillion market capitalization in May 2023.

NVIDIA’S BEAR CASE 

AI enthusiasm has driven share prices for Nvidia substantially higher, but one software analyst recently laid out a downside case for the company.

Gil Luria, senior software analyst at D.A. Davidson, told BNN Bloomberg this month that Nvidia’s large customers like Amazon and Google are stockpiling its graphics processing unit (GPU) products for generative AI experimentation. Luria cautioned that those large customers may not continue buying these chips for years to come, meaning Nvidia’s stock could lose up to 20 per cent of its value.

Luria noted that while his prediction may be early, he thinks Nvidia’s current success is not sustainable over the longer-term.

With files from Bloomberg News