Artificial Intelligence (AI) is reshaping industries, economies, and the fabric of our daily lives. As AI demonstrates its potential to revolutionize businesses across sectors, investors are keenly eyeing opportunities within this space.
In particular, AI Exchange-Traded Funds (ETFs) have become a focal point for those seeking to capitalize on the growth and disruption fueled by artificial intelligence.
Today, we’ll explore how the promise of innovation and why AI ETFs have captured the attention of investors as they navigate the forefront of the Fourth Industrial Revolution.
What is an AI ETF?
An AI ETF, or Artificial Intelligence Exchange-Traded Fund, is an investment fund that focuses on companies involved in developing, deploying, and utilizing artificial intelligence technologies.
It’s important to note that most AI ETFs not only invest in artificial intelligence but tend to include companies involved in software development, technological development, or robotics.
These ETFs allow investors to gain exposure to the growing AI industry and other technological advancement industries without investing directly in individual AI-related stocks.
Characteristics of AI ETFs
1. Investment Focus: AI ETFs typically invest in companies actively engaged in the AI sector. This can include companies developing AI algorithms, providing AI services, manufacturing AI hardware, or integrating AI technologies into their products and services.
2. Diversification: AI ETFs aim to provide investors with a diversified portfolio of AI-related stocks. By holding a basket of stocks from various companies, these ETFs help spread risk, reducing the impact of poor performance from any single company.
3. Industry Segments: AI ETFs may cover various segments within the broader AI theme. This could include machine learning, robotics, natural language processing, computer vision, and other areas where AI technologies are applied.
4. Global Exposure: Many AI ETFs invest in companies worldwide, offering investors exposure to the global AI market. This global perspective allows investors to benefit from the diverse opportunities and innovations in different regions.
5. Liquidity and Accessibility: AI ETFs trade on stock exchanges, providing liquidity similar to individual stocks. Investors can buy and sell shares of AI ETFs during market hours, offering flexibility and ease of access.
6. Active or Passive Management: AI ETFs may be actively or passively managed. Actively managed funds involve fund managers making investment decisions based on research and market analysis. Passively managed funds seek to replicate the performance of a specific AI-related index.
7. Risk and Return Profile: As with any investment, AI ETFs come with their own risks. The performance of these funds can be influenced by factors such as technological advancements, regulatory developments, and the overall market conditions.
Invesco AI and Next Gen Software ETF (IGPT)
| IGPT | |
|---|---|
| Diversification | STOXX World AC NexGen Software Development Index |
| Expense Ratio | 0.61% |
| SEC Yield | -0.02% |
| 1-Year | |
| 5-Year | |
| 10-Year | |
| Dividend Yield | 1.21% |
| Dividend Growth Rate 5Y (CAGR) | 11.82% |
The Invesco AI and Next Gen Software ETF or IGPT is an exchange-traded fund designed to invest in companies that earn direct revenue related to artificial intelligence and technologies or products that contribute to future software development.
The fund does this by tracking the performance of the STOXX World AC NexGen Software Development Index.
The index includes companies or components of their business lines that are expected to benefit from long-term structural trends driven by technological and societal change, which, in the future, may substantially impact their performance.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
| BOTZ | |
|---|---|
| Diversification | Indxx Global Robotics & Artificial Intelligence Thematic |
| Expense Ratio | 0.69% |
| SEC Yield | 0.11% |
| 1-Year | 29.80% |
| 5-Year | 10.79% |
| 10-Year | - |
| Dividend Yield | 0.20% |
| Dividend Growth Rate 5Y (CAGR) | -25.10% |
Global X Robotics & Artificial Intelligence ETF, or BOTZ, is an exchange-traded fund that invests in companies that aim to develop and adopt the utilization of robotics and artificial intelligence. They invest in industrial and automation companies, non-industrial robots, and autonomous vehicles.
The exchange-traded fund tracks the performance of the Indxx Global Robotics & Artificial Intelligence Thematic Index. This index holds approximately 45 companies expected to benefit from AI or robotics.
Global X Artificial Intelligence & Technology ETF (AIQ)
| AIQ | |
|---|---|
| Diversification | Indxx Artificial Intelligence & Big Data Index |
| Expense Ratio | 0.68% |
| SEC Yield | 0.12% |
| 1-Year | 42.74% |
| 5-Year | 17.93% |
| 10-Year | - |
| Dividend Yield | 0.16% |
| Dividend Growth Rate 5Y (CAGR) | -5.30% |
Global X Artificial Intelligence & Technology ETF or AIQ is an exchange-traded fund managed by Global X. This exchange-traded fund is unique because its primary focus is investing in companies that benefit from the implementation or development of artificial intelligence. They also include companies that provide hardware support or bid data analysis for artificial intelligence, expanding the sectors for potential growth.
The fund tracks the performance of the Indxx Artificial Intelligence & Big Data Index. The index and fund hold approximately 90 stocks, with some of the most extensive holdings being Tesla, Salesforce, and Amazon.
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT)
| ROBT | |
|---|---|
| Diversification | Nasdaq CTA Artificial Intelligence and Robotics Index |
| Expense Ratio | 0.65% |
| SEC Yield | 0.22% |
| 1-Year | 15.28% |
| 5-Year | 10.13% |
| 10-Year | - |
| Dividend Yield | 0.24% |
| Dividend Growth Rate 5Y (CAGR) | -1.14% |
First Trust Nasdaq Artificial Intelligence and Robotics ETF or ROBT is an exchange-traded fund managed by First Trust with an inception date of 2018. The fund is designed to invest in companies involved in the artificial intelligence, automation, and robotics sectors.
The exchange-traded fund is unique because it invests in three types of companies in each sector: enablers, engagers, and enhancers. This means that they consider companies developing the building blocks, assisting or enhancing the industry, or those engaging or implementing the products within the industry.
To do this, the fund tracks the performance of the Nasdaq CTA Artificial Intelligence and Robotics Index. The EETF invests in approximately 110 companies, with some of the most significant holdings currently being CCC Intelligent Solution Holdings, Splunk Inc., and Mobileye Global Inc.
Direxion Daily Robotics, Artificial Intelligence & Automation Index Bull 2X Shares (UBOT)
| UBOT | |
|---|---|
| Diversification | Indxx Global Robotics and Artificial Intelligence Thematic Index |
| Expense Ratio | 0.95% |
| SEC Yield | - |
| 1-Year | 49.18% |
| 5-Year | 9.34% |
| 10-Year | - |
| Dividend Yield | 0.65% |
| Dividend Growth Rate 5Y (CAGR) | 23.76% |
Direxion Daily Robotics, Artificial Intelligence & Automation Index Bull 2X Shares or UBOT is an exchange-traded fund managed by Direxion. The fund invests in companies that aim to develop and adopt robotics and artificial intelligence. They invest in industrial and automation companies, non-industrial robots, and autonomous vehicles.
The exchange-traded fund tracks the performance of the Indxx Global Robotics & Artificial Intelligence Thematic Index. This index holds approximately 45 companies expected to benefit from AI or robotics. One unique aspect of the fund is that it has an investment objective of delivering 200% of the performance of the Index.
Final Thoughts
There’s no question that AI brings massive potential for growth and innovation.
That said, it’s when choosing Ai ETF, make sure to consider the segments and related segments you want to invest in. Some ETFs are broader and may include software development, robotics, and artificial intelligence, while others might strictly focus on AI.
