- Qraft Technologies’ AI-enhanced momentum fund beat the S&P 500 by over 10% last year.
- This year, the fund is seriously shedding its tech holdings.
- But the AI algorithm is still hanging on to NVDA, META, and TSLA.
Beating the S&P 500’s 23% gain in 2024 was no easy feat, but an AI-backed ETF did just that.
Qraft Technologies’ AI-Enhanced US Large Cap Momentum ETF (AMOM) finished the year up 38%, thanks to big bets on growth stock winners such as Nvidia (NVDA), Tesla (TSLA), and Palantir (PLTR).
But this year’s volatile market has led the fund — which uses machine learning models to analyze price trends in the market — to do some severe rebalancing in March, reducing its tech exposure in a big way.
Rotating out of tech
AMOM runs on a machine-learning methodology called clustering, which sorts data into similar groups. The algorithm examines the price momentum of large-cap US stocks and rebalances every month, Qraft’s ETF lead Justin Tam told Business Insider.
“In simple terms, it means that we’re looking at previous momentum to see which one is the best predictor of next month,” Tam said.
A tech-heavy concentration hasn’t done the portfolio any favors so far in 2025, as it’s down 16% year-to-date.
“Going into March, it’s gone really bearish on tech,” Tam said of the fund. The AI model has reduced its exposure from the tech sector from over 40% last year to just 26% now.
Instead of retaining its tech-heavy allocation, the algorithm has diversified more into financials and communications services, picking up companies like Wells Fargo (WFC) and Morgan Stanley (MS).
Hanging on to the Magnificent Seven
The AI fund hasn’t completely exited or reduced all of its Big Tech holdings in March, though. In fact, three of its four largest holdings are Magnificent Seven stocks: Nvidia (9.41%), Meta Platforms (6.95%), and Tesla (5.19%).
Even though Nvidia beat Wall Street expectations with its earnings report in February of this year, its stock has taken a beating from macroeconomic volatility and technological developments in the AI space. But Tam remains confident in the stock.
“We do see a lot of signs for optimism in terms of the long-term growth for Nvidia and the AI trade in general, seeing as the data center revenue has stayed steady, which means that the mega-caps are still investing heavily in AI development,” Tam said.
As for Tesla, the stock has seen a 48% decline since its mid-December peak, leaving investors uneasy. However, the fund is still holding on, with a 6% allocation to the electric carmaker.
“We’ve seen it pick names that we couldn’t make sense of and have it pay off quite a lot,” Tam said of the fund’s AI algorithm.
AI isn’t alone in betting on Tesla — the company has supporters on Wall Street, too. Morgan Stanley is overweight on the stock and has classified the company as a top US auto stock pick.
The bank isn’t too worried about Tesla’s decreased sales. “Tesla’s softer auto deliveries are emblematic of a company in the transition from an automotive ‘pure play’ to a highly diversified play on AI and robotics,” Adam Jones, an equity analyst at Morgan Stanley, wrote in a note earlier this month.
