Artificial intelligence, or AI, is all over the news these days. It’s somewhat of a controversial topic since it has the potential to change the economy, the job market, and even human existence, so discussions of the topic run both are wide-ranging.
If one thing is certain, it’s that AI has investment potential. Whether you are embracing the technology or not, it seems destined to play a major part in our future. As an investor, you can take advantage of the opportunity by investing in artificial intelligence exchange-traded funds (ETFs). They offer exposure to the growing AI sector while spreading the risk among many different companies.
Table of Contents
- What Is Artificial Intelligence?
- Why Invest in Artificial Intelligence?
- Best Artificial Intelligence (AI) ETFs for 2024
- iShares Exponential Technologies ETF (XT)
- Global X Robotics & Artificial Intelligence ETF (BOTZ)
- ROBO Global Robotics and Automation Index ETF (ROBO)
- Global X Artificial Intelligence & Technology ETF (AIQ)
- Ark Autonomous Technology & Robotics ETF (ARKQ)
- Where to Invest in Artificial Intelligence ETFs
- Final Thoughts on AI ETFs
What Is Artificial Intelligence?
At the risk of oversimplifying AI, Stanford University gives the following very brief description:
“Artificial Intelligence (AI), a term coined by emeritus Stanford Professor John McCarthy in 1955, was defined by him as ‘the science and engineering of making intelligent machines.’ In the past, humans have programmed machines to behave in a clever way, like playing chess, but today, we emphasize machines that can learn, at least somewhat like human beings do.”
At the most basic level, AI attempts to build and program machines that can replicate human thinking. But since they are machines, they have the advantage of being able to retain and analyze much greater volumes of information than the human brain.
Exactly how far that process will go, or what legal or political limitations will be placed on it, are as yet unknown. But it’s not difficult to project the potential for AI to affect and greatly improve nearly every area of human existence.
Why Invest in Artificial Intelligence?
Some see artificial intelligence as the next technological wave, much as personal computers were in the 1980s and the dot-com industry was in the 90s. That’s not an unreasonable conclusion, given that technology has progressed steadily since the beginning of the Industrial Revolution.
But to put some numbers behind the current state of AI, the industry as a whole was estimated to be valued at nearly $137 billion in 2022. Furthermore, the growth rate for the industry is expected to be 37% per year through 2030.
If those projections are even close to being correct, it’s still early enough to get into AI investing to reap big returns. And since the industry is so new and no one knows which companies will emerge as the leaders in AI, it may be best for most investors to invest in the sector through exchange-traded funds (ETFs). An ETF can provide you with a portfolio of multiple companies engaged in the AI industry.
With that in mind, let’s look at five of the best artificial intelligence ETFs for 2023.
Best Artificial Intelligence (AI) ETFs for 2024
🗓️ All figures and holdings are accurate as of June 2023.
iShares Exponential Technologies ETF (XT)
- Assets under management: $3.08 billion
- Date launched: March 19, 2015
- Number of holdings: 197
- Expense ratio: 0.46%
- Performance: YTD: 5.74 %; 1-year: -9.84%; 3-year: 14.90%; 5-year: 8.98%; Since inception: 10.75 %.
iShares Exponential Technologies ETF is the largest fund on this list, with more than $3 billion in assets under management. It also includes shares in nearly 200 companies. The fund seeks access to global companies with exposure to “exponential technologies” and the ability to create large-scale positive economic benefits. It focuses on companies engaged in nine different technology themes.
This index fund comprises companies in developed and emerging markets worldwide. The index it tracks is the Morningstar Exponential Technologies Index. What makes this ETF particularly attractive is that the average price-to-earnings ratio of the companies in the fund is 20.67, which is slightly higher than the average for the S&P 500 index.
Top 5 holdings:
- Meta Platforms Inc. (META)
- NVIDIA Corp. (NVDA)
- Hubspot Inc. (HUBS)
- Salesforce Inc. (CRM)
- Innovent Biologics Inc. (1801)
Global X Robotics & Artificial Intelligence ETF (BOTZ)
- Assets under management: $1.71 billion
- Date launched: September 12, 2016
- Number of holdings: 47
- Expense ratio: 0.69%
- Performance: 1-year: -11.90%; 3-year: 12.15%; 5-year: 1.66%; Since inception: 9.12%.
Global X Robotics & Artificial Intelligence ETF focuses on the global robotics market. The fund attempts to acquire global exposure across multiple sectors and industries. At present, the top three sectors the fund is invested in are information technology (43.7%), industrials (38.0%), and healthcare (16.2%). Geographically, 45% of investment is in the US, 32.9% in Japan, and 10.9% in Switzerland.
Top 5 holdings:
- Intuitive Surgical Inc. (ISRG)
- NVIDIA Corp. (NVDA)
- ABB LTD-Reg (ABBN SW)
- Keyence Corp. (6861.JP)
- Fanuc Corp. (6954.JP)
ROBO Global Robotics and Automation Index ETF (ROBO)
- Assets under management: $1.34 billion
- Date launched: October 21, 2013
- Number of holdings: 79
- Expense ratio: 0.95%
- Performance: YTD: 14.68 %; 1-year: 5.01 %; 3-year: 11.14 %; 5-year: 5.92%; Since inception: 8.48%.
The ROBO Global Robotics and Automation Index ETF invests in companies that are generating transformative innovations, with a focus on robotics, automation, and artificial intelligence. That includes companies that are creating technology to enable intelligent systems that can sense, process, and apply those technologies for the benefit of both businesses and consumers. The fund has many more holdings than BOTZ but has a much higher expense ratio of 0.95%.
Top 5 holdings:
- Intuitive Surgical Inc. (ISRG)
- Kardex Holding (KARN SW)
- Keyence Corp. (6861.JP)
- Azenta Inc (AZTA)
- Cognex Corp (CGNX)
Global X Artificial Intelligence & Technology ETF (AIQ)
- Assets under management: $148.1 million
- Date launched: May 11, 2018
- Number of holdings: 88
- Expense ratio: 0.68%
- Performance: 1-year: 2.96 %; 3-year: 10.53 %; Since inception: 10.28 %.
Global X Artificial Intelligence & Technology ETF invests in companies that stand to benefit from advances in AI in their products and services, but also in the companies that provide the hardware and other technology to facilitate those advances.
The fund is based on the Indxx Artificial Intelligence & Big Data Index. For that reason, the fund has a larger number of holdings than many other funds that are focused on AI.
Top 5 holdings:
- Meta Platforms Inc. (META)
- NVIDIA Corp. (NVDA)
- Microsoft Corp. (MSFT)
- Salesforce Inc. (CRM)
- Apple Inc. (AAPL)
Ark Autonomous Technology & Robotics ETF (ARKQ)
- Assets under management: $948 million
- Date launched: September 30, 2014
- Number of holdings: 30 to 50
- Expense ratio: 0.75%
- Performance: YTD: 22.70 %; 1-year: -25.63%; 3-year: 15.38 %; 5-year: 9.89%; Since inception: 12.39 %.
Ark Autonomous Technology & Robotics ETF invests in five primary sectors, autonomous transportation, robotics and automation, 3-D printing, energy storage, and space exploration.
Ark Autonomous Technology & Robotics is an actively managed ETF with an emphasis on long-term growth. The fund invests in foreign and domestic companies expected to benefit substantially from AI developments.
Top 5 holdings:
- Tesla, Inc. (TSLA)
- Kratos Defense & Security (KTOS)
- Iridium Communications Inc. (IRDM)
- Trimble Inc. (TRMB)
- Uipath Inc. – Class A (PATH)
Where to Invest in Artificial Intelligence ETFs
There are many investment apps and platforms where you can invest in ETFs that specialize in artificial intelligence. But three of the best are Ally Invest, SoFi Invest, and Robinhood.
Ally Invest
Ally Invest is an investment platform where you can buy and sell commission-free ETFs and other securities, like stocks and options. If you prefer a managed option, Ally Invest also has a low-cost robo-advisor that can give you the best combination of self-directed investing with part of your portfolio professionally managed – all in one platform. For more information, check out our Ally Invest Review.
SoFi Invest
You can also trade ETFs, stocks, and other securities with SoFi Invest. Like most investment brokers, SoFi offers commission-free trades. And in what has become a full-service financial platform, SoFi also offers loans, insurance, and other financial products, as well as a robo-advisor option if you prefer to have your portfolio professionally managed. You can check out the latest SoFi promotions here.
Robinhood
Robinhood is an investment app where you can trade stocks, options, cryptocurrencies, and ETFs – all commission-free. You can open an account with no money at all and begin investing with just $1. Robinhood also offers cash options. They provide a high-yield savings account and the Robinhood Cash Card, which can be used to earn rewards while using the card to make purchases. Read our full Robinhood review here.
Final Thoughts on AI ETFs
Though there is controversy surrounding AI’s economic and social impacts, there’s little doubt it will profoundly impact the future. That presents a unique, perhaps once-in-a-lifetime investment opportunity that may be too good to pass up.
At the same time, don’t get carried away! Regardless of where you believe AI is heading, don’t get overextended. It is a new technological development with plenty of uncertainties. Invest no more in the sector than you are prepared to lose. At the same time, make sure you maintain an otherwise well-diversified portfolio to minimize your risk.
