One of the best ways to tap into a sector or industry is through an exchange-traded fund. ETFs trade like stocks, but they resemble mutual funds in that they are baskets of stocks. Thus, by their very nature, they are more diversified than a single stock.
The hottest part of the market this year and perhaps for the foreseeable future is artificial intelligence. AI is not really an industry, per se; it is more like an application or investment theme that runs across all industries. Thus, finding individual stocks that are driven by AI is no easy task.
It’s far easier to invest in an AI-themed ETF, which includes a basket of stocks that are fueled by this emerging technology. That way, you have the benefit of knowing you are investing in a wide swath of AI-focused stocks and not trying to pick one or two winners.
Here are four top-performing AI-focused ETFs to consider, each of which occupies a different part of the space, as their holdings will show.
1. ROBO Global Artificial Intelligence ETF
The ROBO Global Artificial Intelligence ETF (NYMARKET:THNQ) tracks the proprietary ROBO Global AI Index. This ETF consists of 63 stocks from companies around the world that are either developing the technology and infrastructure that enables AI or applying AI in various ways, from business processes to e-commerce to healthcare, among others. The stocks in the index are identified by ROBO Global’s research team and strategic advisors, and greater weight is given to the purest-play AI stocks.
The five largest holdings in the ETF are Alteryx (NYSE:AYX), Crowdstrike Holdings (NASDAQ:CRWD), Cloudflare (NYSE:NET), Splunk (NASDAQ:SPLK) and Advanced Micro Devices (NASDAQ:AMD).
As of Dec. 15, the ETF is up 56% year to date (YTD) and 44% over the past month. It was launched in May 2020, so it doesn’t have a long track record and only has about $119 million in assets under management. Further, it has an expense ratio of 0.68%.
2. Global X Artificial Intelligence and Technology ETF
The Global X Artificial Intelligence and Technology ETF (NASDAQ:AIQ) is one of two AI-focused ETFs offered by Global X. It tracks the Indxx Artificial Intelligence & Big Data Index, which includes companies that have the potential to benefit from the further development and utilization of AI technology in their products and services. It also consists of companies that provide hardware that facilitates the use of AI for the analysis of data. This ETF is slightly broader than the Robo ETF, with 87 holdings.
The five largest positions are Intel (NASDAQ:INTC), IBM (NYSE:IBM), ServiceNow (NYSE:NOW), Qualcomm (NASDAQ:QCOM) and Amazon (NASDAQ:AMZN), so you can see this ETF casts a wider net.
This ETF is up 52% YTD and about 43% for the last year. It was launched in 2018, so it does have a five-year track record, returning about 17.6% on an annualized basis. It has about $845 million in assets with an expense ratio of 0.68%.
3. Global X Robotics and Artificial Intelligence ETF
Global X also has another AI-centered ETF, the Global X Robotics and Artificial Intelligence ETF (NASDAQ:BOTZ). This is a more focused fund, investing in companies that utilize robotics and AI, including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
The ETF’s top holdings are NVIDIA (NASDAQ:NVDA) and Intuitive Surgical (NASDAQ:ISRG), alongside some global leaders in the space like ABB Group (Switzerland), Keyence (Japan) and Fanuc (Japan). It tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index and consists of 44 holdings.
The $2.3 billion ETF is up 36% YTD and 28.3% over the past year. Since its inception in 2016, it has a five-year annualized return of 9.8%, and its expense ratio is 0.69%.
The final selection is the iShares Robotics and Artificial Intelligence Multisector ETF (NYMARKET:IRBO). This fund tracks the NYSE FactSet Global Robotics and Artificial Intelligence Index, which includes both developed and emerging-market companies that stand to benefit and grow from innovations in robotics technologies and artificial intelligence. It is the broadest of the four ETFs, with about 112 holdings.
The five largest names in the ETF are FuboTV (NYSE:FUBO), Faraday Technology (Taiwan), Alchip Technologies (Taiwan), MicroStrategy (NASDAQ:MSTR) and Via Technologies (Taiwan).
This $569 million ETF is up 35.7% YTD and 27.3% over the past year. Its inception was in June 2018, so its five-year annualized return is 11.1%. It has an expense ratio of 0.47%.
These ETFs are not the only four AI-focused options, but they are the top performers on a YTD and one-year basis. As you can see, they are quite different, tracking various segments of this vast and growing part of the economy that is AI.
