TRUESHARES

TRUESHARES

The AI Regulation Landscape

Three years ago, the European Union drafted a landmark set of policies1 to regulate AI in an effort to protect against the nascent technology’s greatest potential harms. The policy took three years and myriad experts to draft. But when ChatGPT went viral in late 2022, the EU was sent back to the drawing board. 

As competitor chatbots and other forms of AI have proliferated since, their applications have expanded into nearly every sector of our lives, from education to healthcare. The first human implanted with Neuralink’s brain chip2 raised ethical and transparency concerns earlier this year, yet only a fraction of AI’s risks, benefits, and capabilities have yet to be understood.

AI regulation made up a significant portion of the resolution to the US writer’s strike3 last summer, which placed boundaries on the use and disclosure of AI in script writing, seen as a big win for labor that is expected to creep into other industries. The Biden administration also signed an executive order4 to put some guardrails in place for the development and use of AI late last year. Such safeguards require companies to report the risks their technologies pose to national security as well as regulations around deep fakes and the spreading of misinformation, particularly in the context of elections and consumer protection.

While the US appears to be taking more of a stepwise approach, the European Union has pursued a more holistic policy. In March of this year, the EU officially passed2 one of the first and most comprehensive regulations on AI, known as the AI Act5, which is set to go into effect by July. The AI Act focuses on protecting against risks while also fostering innovation. The primary risks the AI Act deems of highest concern include spreading misinformation, automating jobs, and threatening national security. The AI Act includes transparency requirements and restrictions on specific use cases such as facial recognition in law enforcement.

In November of last year, the UK gathered 28 governments, including China and the US, to agree on terms for international cooperation on AI regulation, known as the Bletchley Declaration6. Since then, the UK government has pledged an investment2 of £100 million to promote responsible AI, including £10 million for regulators to adapt and enforce existing regulations to AI applications. 

Meanwhile, China is taking a more strict route by censoring chatbots6. Saudi Arabia and the United Arab Emirates1, on the other hand, are investing in AI research at the government level to better understand the landscape. 

Geopolitical tensions and domestic policy also impact the AI market on a global scale. Taiwan2 currently produces most of the world’s AI chips, many of which are Nvidia products. With escalating tensions with China and the U.S. CHIPS Act coming into effect this year, supply chain and national security issues may impact the chips market that enables the entire AI industry.

As we pursue AI investment opportunities in 2024, the portfolio managers of our Technology, AI, and Deep Learning ETF (LRNZ) will continue to use fundamentals to track regulations with a watchful eye. The evolution of the AI regulation landscape will be just as impactful as the innovations in determining the shape this nascent and powerful technology is allowed to take on a global scale. 

  1. https://www.nytimes.com/2023/12/06/technology/ai-regulation-policies.html
  2. https://foreignpolicy.com/2023/06/20/openai-ceo-diplomacy-artificial-intelligence/
  3. https://www.nytimes.com/2023/10/30/us/politics/biden-ai-regulation.html
  4. https://www.nytimes.com/2023/12/08/technology/eu-ai-act-regulation.html 
  5. https://www.nytimes.com/2023/11/01/world/europe/uk-ai-summit-sunak.html
  6. https://www.investopedia.com/ai-is-the-biggest-tech-investing-theme-for-2024-8404597 

The TrueShares AI & Deep Learning ETF (AI ETF) is also subject to the following risks: Artificial Intelligence, Machine Learning and Deep Learning Investment Risk – the extent of such technologies’ versatility has not yet been fully explored. There is no guarantee that these products or services will be successful and the securities of such companies, especially smaller, start-up companies, are typically more volatile than those of companies that do not rely heavily on technology. Foreign Securities Risk -The Fund invests in foreign securities which involves certain risks such as currency volatility, political and social instability and reduced market liquidity. Growth Investing Risk – The risk of investing in growth stocks that may be more volatile than other stocks because they are more sensitive to investor perceptions of the issuing company’s growth potential. IPO Risk – The Fund may invest in companies that have recently completed an initial public offering that are unseasoned equities lacking a trading history, a track record of reporting to investors, and widely available research coverage. IPOs are thus often subject to extreme price volatility and speculative trading. New Issuer Risk – Investments in shares of new issuers involve greater risks than investments in shares of companies that have traded publicly on an exchange for extended periods of time. Non-Diversification Risk – The Fund is non-diversified which means it may be invested in a limited number of issuers and susceptible to any economic, political and regulatory events than a more diversified fund.

Recent Posts

    Request a meeting with our investment team

    433 W. Van Buren Street, 1100-D
    Chicago, IL 60607
    Email: info@true-shares.com
    Phone: 877.774.TRUE

    ©2024, TrueShares, ©2024 TrueMark Investments, LLC. (“TrueMark”).

    Before investing, carefully consider the TrueShares ETFs investment objectives, risks, charges and expenses. Specific information about TrueShares is contained in the prospectus and a summary prospectus, copies of which may be obtained by visiting www.www.true-shares.com. Read the prospectus carefully before you invest.

    An investment in TrueShares is subject to numerous risks, including possible loss of principal. The ETFs are subject to the following principal risks: Authorized Participants, Market Makers, and Liquidity Providers Concentration Risk associated with ETFs; Equity Market Risk; Management Risk; Market Capitalization Risk (Large Cap; Mid Cap, Small Cap Stock); Market Risk; New Fund Risk.

    Individual investors should contact their financial advisor or broker dealer representative for more information on TrueShares ETFs.

    Investment Products and Services are: Not FDIC INSURED / May lose value / No bank guarantee

    All registered investment companies, including TrueShares, are obliged to distribute portfolio gains to shareholders at year-end regardless of performance. Trading in TrueShares ETFs will also generate tax consequences and transaction expenses. The information provided is not intended to be tax advice. Tax consequences of dividend distributions may vary by individual taxpayer.

    TrueShares ETFs are bought and sold through exchange trading at market price, not Net Asset Value (NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns.

    ETF shares may be bought or sold throughout the day at their market price, not their NAV, on the exchange on which they are listed. Shares of ETFs are tradable on secondary markets and may trade either at a premium or a discount to their NAV on the secondary market.

    ETFs trade like stocks, fluctuate in market value and may trade at prices above or below the ETF’s NAV. Brokerage commissions and ETF expenses will reduce returns.

    Fund Intelligence Mutual Fund Industry and ETF Award shortlists and winners are comprised of individuals and firms who have submitted entries or been nominated via the online submission process, as well as through recommendations from leading market participants. Fund Intelligence Mutual Fund Industry and ETF Award judges will use the submitted application material, as well as any uploaded supplemental information, to determine which firm, individual or product they believe to be the most suitable and deserving winners for each category. Fund Intelligence Mutual Fund Industry and ETF Award judges have the discretionary power to move nominations into alternative categories that they think may be more suitable. Fund Intelligence Mutual Fund Industry and ETF Awards were decided by an independent panel of 20 judges with expertise across the asset management space.

    TrueShares ETFs (the “Funds”) are registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940. Foreside Fund Services, LLC is the distributor for the Structured Outcome Funds, LRNZ, ERNZ, FLDZ, DIVZ, RNWZ, and SPCZ.  Paralel Distributors LLC is the distributor for QBER and QBUL.  Foreside Fund Services, LLC, Paralel Distributors LLC, and TrueMark Investments, LLC. are not affiliated.  

    TrueMark Investments, LLC, not an affiliate of Foreside Fund Services, LLC., is the investment advisor to the Funds and receives a fee from the Funds for its services.

    TrueShares ETFs are offered only to United States residents, and information on this site is intended only for such persons. Nothing on this website should be considered a solicitation to buy nor an offer to sell shares of any fund in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction.