For investors who want to gain exposure to artificial intelligence stocks, exchange-traded funds (ETFs) are a popular avenue, because AI ETFs allow investors exposure to the overall market rather than individual AI stocks.
AI investing has exploded in popularity in recent years, with many major tech stocks focusing on developing their AI capabilities.
However, the sector has a long history. The phrase ‘artificial intelligence’ has been around since 1955, when it was used to describe a new computer science subdiscipline. Today we use AI to describe simulated intelligence in machines. In other words, machines with AI are capable of simulating thinking like people and mimicking their actions.
As applications for AI rapidly expand, it’s clear that this market isn’t going away anytime soon.
Research conducted by Markets and Markets suggests the AI industry will be worth over US$1.34 trillion by 2030, increasing at a compound annual growth rate of 35.7 percent between 2024 and 2030. With that much money going into the sector, there is certainly no shortage of ways for investors to add AI investments to their portfolios.
According to ETFdb.com, the AI ETFs on its list are required to meet one of three criteria:
- Focus on stocks developing new products, services or technological improvements in AI-related research.
- Have 25 percent portfolio exposure to companies that spend money on AI research and development.
- Choose individual securities to be included in the fund based on their use of AI methods.
1. Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ)
Assets under management: US$3.31 billion
First on the list is the Global X Artificial Intelligence & Technology ETF. Established in May 2018, it tracks the performance of the Indxx Artificial Intelligence & Big Data Index. The fund has an expense ratio of 0.68 percent.
‘AIQ is passively managed to invest in developed market companies that are involved in the use of artificial intelligence to analyze big data, whether for their own operations, as a service to other companies, or through the production of related hardware,’ according to ETF.com.
The Global X Artificial Intelligence & Technology ETF’s 171 holdings include Tencent Holdings (OTC Pink:TCEHY,HKEX:0700) and Alibaba Alibaba (NYSE:BABA).
2. Global X Robotics & Artificial Intelligence Thematic ETF (NASDAQ:BOTZ)
Assets under management: US$2.88 billion
The Global X Robotics & Artificial Intelligence Thematic ETF exposure to firms involved in the global automation and robotics industries. According to ETF.com, the fund was launched in September 2016 and has holdings in various markets, including technology, healthcare and energy. Eligible companies must earn a significant portion of their revenue from or have a stated business purpose in the fields of robotics or AI.
The Global X Robotics & Artificial Intelligence Thematic ETF currently tracks 92 holdings, including Intuitive Surgical (NASDAQ:ISRG) and NVIDIA (NASDAQ:NVDA). The fund has an expense ratio of 0.68 percent.
3. Defiance Quantum ETF (NASDAQ:QTUM)
Assets under management: US$1.17 billion
The Defiance Quantum ETF launched in September 2018. It tracks an index composed of 144 companies that derive at least half of their annual revenues from quantum computing and machine learning technology development activities.
The fund has the lowest expense ratio of the five AI funds on this list at 0.4 percent.
Some of the ETF’s top holdings include Alibaba and D-Wave Quantum (NYSE:QBTS).
4. First Trust NASDAQ Artificial Intelligence and Robotics ETF (NASDAQ:ROBT)
Assets under management: US$494 million
The First Trust NASDAQ Artificial Intelligence and Robotics ETF was launched in February 2018. It follows a modified equal-weighted index of all-cap global companies involved in AI or robotics.
The ETF currently tracks 102 companies, and two of its top holdings are Palantir Technologies (NASDAQ:PLTR) and Meta Platforms (NASDAQ:META). The fund has an expense ratio of 0.65 percent.
5. Invesco AI and Next Gen Software ETF (ARCA:IGPT)
Assets under management: US$459 million
The last AI ETF on this list is the Invesco AI and Next Gen Software ETF. It is the longest running compared to the others, having launched in June 2005. The fund has an expense ratio of 0.58 percent.
It is based on the STOXX World AC NexGen Software Development Index and tracks the performance of companies that derive a direct revenue from technologies or products that contribute to future software development. The Invesco AI and Next Gen Software ETF’s 101 holdings include Alphabet (NASDAQ:GOOGL) and Qualcomm (NASDAQ:QCOM).
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
