Key Takeaways
- Concerns about an AI bubble are present, but this presents opportunities for investors, particularly in closed-end funds (CEFs) like the Virtus Artificial Intelligence & Technology Opportunities Fund (AIO).
- Despite holding major AI players, AIO is trading at a significant discount to its net asset value, suggesting a potential for appreciation as investor sentiment shifts.
- Economic indicators, such as stable credit card delinquency rates and limited impact on employment from AI, suggest the current economic environment is not indicative of a widespread bubble.
- CEFs like AIO offer attractive dividend yields and the potential for price appreciation as the market recognizes their underlying value.
- While AIO is currently discounted, a market selloff driven by AI fears could present an even more attractive entry point with a higher yield.
Navigating the AI Bubble Discussion
The discussion around an AI bubble shouldn’t deter investors; instead, it can unveil substantial opportunities for significant dividends and capital gains, especially within closed-end funds (CEFs). These funds frequently offer attractive yields, around 8% currently, and often present undervalued opportunities that are compelling.
A strategy that focuses on investing in these CEFs can yield rewards as slower-moving CEF investors eventually recognize their inherent value, potentially driving up fund prices. Throughout this period, investors can benefit from collecting attractive dividends, many of which are distributed monthly.
Spotlight on the Virtus Artificial Intelligence & Technology Opportunities Fund (AIO)
A notable investment prospect is the Virtus Artificial Intelligence & Technology Opportunities Fund (AIO), currently offering a yield of 7.7% and trading at an unjustified discount. The fund’s portfolio includes substantial holdings in key AI leaders such as Meta Platforms (META), NVIDIA (NVDA), Oracle (ORCL), and Microsoft (MSFT). It also invests in companies that are integrating AI into their operations, including JPMorgan Chase & Co. (JPM) and Citigroup (C).
Given the strong performance of many of these underlying stocks and the fund’s specific focus on AI, AIO would logically be expected to trade at a premium. However, it is currently available at a 6.7% discount to its net asset value (NAV), which represents the market value of the AI stocks it holds.
💡 If there were a selloff in AI stocks, AIO’s discount could potentially widen, making it even more attractive.
Understanding the AI Bubble Debate
A crucial question for many investors is whether the current market is experiencing an AI-driven bubble. Insights into market sentiment can be gained by examining public interest, often tracked through Google searches for terms like stock market bubble.
Data indicates a notable increase in searches for stock market bubble since September 2024, reaching a five-year high. This heightened awareness is likely influenced by historical market events such as the dot-com bubble and the 2008 real estate crisis, which have left a lasting impact on investor psychology.
Examining the Broader Economic Landscape
Despite prevalent fears, the argument for a current AI-driven bubble faces scrutiny. Some analyses suggest that AI investment significantly contributed to GDP growth in early 2025. However, such perspectives often overlook critical economic nuances.
📊 A substantial portion of AI investment is imported, and GDP specifically measures domestic productivity. Bloomberg estimates that excluding AI investment, U.S. GDP growth would have been around 1.1% instead of 1.6% in the first half of 2025. While AI is a significant contributor to economic expansion, it is not the sole driver.
💡 It’s important to remain skeptical of claims that overemphasize AI’s impact as the sole driver of economic growth, as this can sometimes be used to foster unwarranted fear.
Furthermore, other economic indicators suggest stability rather than an imminent market downturn.
✅ This data illustrates that credit card delinquency rates have decreased over the past year, currently standing at approximately 3.1%. This figure is considerably lower than rates observed in past decades, suggesting a resilient consumer base.
AI’s Current Impact on the Labor Market
To further assess the AI narrative, examining its real-world impact on employment is essential. Some research indicates that AI has not yet significantly altered the overall labor market landscape.
According to a Yale study, the share of workers exposed to AI has remained relatively stable since the technology’s introduction. Researchers noted that if AI were automating jobs on a large scale, a noticeable decline in employment in certain sectors would be expected, which has not materialized.
⚡ This suggests that AI is not currently leading to widespread job losses or negatively impacting American wages, nor does it necessarily indicate an imminent bubble. While these conditions could evolve, they do not reflect the current economic reality.
Strategic Investment Opportunities in the AI Sector
The current market environment presents a unique investment proposition. A potential selloff in AI stocks, whether driven by job displacement fears or unmet expectations, is likely to affect the broader market, including major AI players like Alphabet (GOOGL), Meta, and NVIDIA. Investors are closely monitoring these companies, poised to sell at the first sign of trouble. This heightened vigilance means that any selloff fueled by unfounded fears surrounding AI’s negative impacts could create excellent buying opportunities.
A Promising CEF Opportunity: AIO
This is precisely where the Virtus Artificial Intelligence & Technology Opportunities Fund (AIO) re-enters the discussion. It offers diversified exposure to the AI sector while providing a solid 7.7% dividend, distributed monthly.
Monthly Dividends from AI Exposure: AIO Delivers
AIO is a fund familiar to many investors, having been acquired in September 2020. Early investment in this fund, before AI became a widespread market focus, resulted in a substantial 23% total return over the subsequent three years, including a 6.4% dividend yield at the time of purchase.
📍 Currently, AIO is trading at a discount, even more so than during periods of market volatility in the spring. This situation appears illogical, yet it offers a compelling entry point.
The fund, which saw its discount narrow to a premium by June of the previous year, has now returned to bargain territory. While this doesn’t signal an immediate purchase, it highlights AIO’s sensitivity to market sentiment. Should AI stocks experience a selloff, AIO is likely to be sold off more aggressively, widening its discount and increasing its yield. This scenario would present an opportune moment to invest.
📍 For now, the fund will continue to be monitored, anticipating a more attractive dividend and a deeper discount as market sentiment around AI fears subsides.
Explore Other High-Yielding AI Opportunities
While AIO presents an interesting case, it’s just one component of a broader AI dividend strategy. Other significant AI-focused dividend opportunities are currently available. Four alternative funds offer a combined yield of 8.2% and are trading at discounts, making them ideal for immediate investment.
Their balanced portfolios, combining AI developers and users, provide a natural hedge against volatility in major AI stocks. These funds are structured for long-term holding, allowing investors to consistently collect substantial dividends. A detailed breakdown of this AI-powered dividend strategy, including specific recommendations for these four bargain-priced 8.2% yielders, is available in a special investor bulletin. It provides comprehensive information and includes a free downloadable report with their names and tickers.
These selections represent some of the best and most cost-effective opportunities to capture significant dividends and potential upside as the AI landscape continues to evolve. Exploring these options is highly recommended to remain well-positioned for future growth in the AI sector.
Final Thoughts
The current discourse surrounding an AI bubble presents both challenges and significant opportunities for astute investors. While fears of market speculation are understandable, a closer examination of economic data and AI’s emerging role suggests a more nuanced reality. Understanding these dynamics is key to identifying undervalued assets like CEFs, which can offer attractive yields and capital appreciation potential, particularly when market sentiment creates unjustified discounts.