Qraft Technologies' AI-driven momentum fund outperformed the S&P 500 by more than 10% last year. This year, however, the fund is significantly reducing its technology holdings. Despite this shift, the AI algorithm continues to retain shares in NVDA, META, and TSLA. Achieving a return exceeding the S&P 500's 23% gain in 2024 has been a challenge, yet an AI-supported ETF accomplished just that. Qraft Technologies' AI-Enhanced US Large Cap Momentum ETF (AMOM) ended the year up 38%, largely due to substantial investments in successful growth stocks like Nvidia (NVDA), Tesla (TSLA), and Palantir (PLTR). However, the current year's market volatility has compelled the fund—utilizing machine learning models to track price trends—to undergo significant rebalancing in March, drastically lowering its tech exposure. Shifting Away from Tech AMOM employs a machine-learning technique known as clustering to categorize data into similar groups. The algorithm analyzes the price momentum of large-cap U. S. stocks and rebalances on a monthly basis, according to Qraft's ETF lead, Justin Tam, in an interview with Business Insider. "In simple terms, it involves looking at past momentum to identify the best predictors for the upcoming month, " Tam explained. So far in 2025, a tech-heavy concentration has been detrimental to the portfolio, resulting in a 16% decline year-to-date. "As of March, the outlook for tech has turned quite bearish, " Tam noted. The AI model has decreased its tech sector exposure from over 40% last year to just 26% currently. Instead of maintaining a technology-heavy focus, the algorithm has diversified into financials and communications services, incorporating companies such as Wells Fargo (WFC) and Morgan Stanley (MS). Related Stories Maintaining a Grip on the Magnificent Seven Nevertheless, the AI fund hasn’t fully divested or cut back on all its Big Tech holdings in March. In fact, three of its four largest positions are in Magnificent Seven stocks: Nvidia (9. 41%), Meta Platforms (6. 95%), and Tesla (5. 19%). Despite Nvidia exceeding Wall Street's expectations with its February earnings report, the stock has struggled amid macroeconomic fluctuations and advancements in AI technology.

Still, Tam believes in the stock's potential. "We see plenty of reasons for optimism regarding Nvidia’s long-term growth and the overall AI market, as data center revenues remain stable, indicating that mega-cap companies are still heavily investing in AI development, " Tam stated. As for Tesla, the stock has dropped 48% since its peak in mid-December, causing concern among investors. Nonetheless, the fund continues to hold a 6% stake in the electric vehicle manufacturer. "The algorithm has chosen some stocks that initially seemed puzzling, but they’ve proven to be quite rewarding, " Tam commented. The AI isn't the only entity betting on Tesla—Wall Street has its supporters as well. Morgan Stanley has a favorable outlook on the stock and has named it a top pick among U. S. automakers. The bank isn't overly concerned about Tesla’s declining sales. "Tesla's reduced auto deliveries reflect a company transitioning from a pure automotive focus to a diverse strategy involving AI and robotics, " noted Adam Jones, an equity analyst at Morgan Stanley, in a recent report.