You probably interact with artificial intelligence (AI) more often than you think. AI is powering the algorithm arranging your Netflix (NFLX 0.57%) menu, the software expediting your Amazon (AMZN 0.69%) package, and the brains behind many of the smartphone apps you use every day.
Image source: The Motley Fool.
If you’ve used ChatGPT, the OpenAI chatbot that has wowed users by writing code and instantly answering complex questions, you’ve gotten a glimpse into the next frontier in AI, known as generative AI. Big tech companies, including Google’s Gemini and Meta AI, and others are racing to develop AI chatbots and other generative AI technologies.
If you want portfolio exposure to AI companies but don’t want to identify individual AI stocks, you can invest in an AI-focused exchange-traded fund (ETF). AI ETFs provide exposure to a broad range of the best AI companies, so you don’t need to research and choose individual stocks on your own.
Best AI ETFs
Best AI ETFs to buy in 2024
| AI ETF | Assets Under Management | Expense Ratio |
|---|---|---|
| Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ) | $2.63 billion | 0.68% |
| ROBO Global Robotics and Automation Index ETF (NYSEMKT:ROBO) | $1.25 billion | 0.95% |
| iShares Robotics and Artificial Intelligence ETF (NYSEMKT:IRBO) | $659.3 million | 0.47% |
| First Trust Nasdaq Artificial Intelligence ETF (NASDAQ:ROBT) | $520.75 million | 0.65% |
Keep reading to learn more about each of these AI ETFs.
1. Global X Robotics and Artificial Intelligence ETF
1. Global X Robotics & Artificial Intelligence ETF
Established in 2016, the Global X Robotics & Artificial Intelligence ETF (BOTZ -0.1%) is a fund that invests in “companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence.” That includes enterprises working in industrial robotics, automation, nonindustrial robots, and autonomous vehicles.
Global X currently holds 44 stocks. Its top five holdings, which account for about 45% of the fund’s assets, are:
- Nvidia (NVDA -0.21%): A semiconductor maker whose chips are used in a wide variety of applications — including autonomous vehicles, virtual computing, and cryptocurrency mining — and are central to many AI technologies
- ABB (OTCPK:ABBN.Y): Swiss maker of industrial automation and robotics products for use in utilities and infrastructure
- Intuitive Surgical (ISRG -0.04%): Maker of the da Vinci robotic surgical system, which allows for minimally invasive surgeries with precise control
- Keyence (KYCCF -0.21%): A Japanese company that makes factory automation products, such as sensors and scanners
- SMC Corp (OTC:SMCAY): Japanese manufacturer of automatic control equipment for a variety of industrial applications
As the chart below shows, shares of the ETF have underperformed the S&P 500 index since its launch in 2016. The share price fell sharply in 2022, in line with the broad sell-off in tech stocks, although Global X has rebounded since then.
Global X is currently underperforming the S&P 500.
Global X offered a modest dividend yield of 0.3% at the time of this writing, but it is better suited to be a growth-oriented investment. Its expense ratio of 0.68% is higher than what you’d pay for an index fund, but it’s also reasonable for the fund’s performance history.
2. ROBO Global Robotics and Automation Index ETF
2. ROBO Global Robotics and Automation Index ETF
The ROBO Global Robotics and Automation Index ETF (ROBO -0.4%) is focused on companies driving “transformative innovations in robotics, automation, and artificial intelligence.” ROBO invests in companies primarily focused on AI, cloud computing, and other technology companies.
Cloud Computing
Cloud computing is a network of interconnected servers and data centers working together to deliver a service through the Internet.
ROBO holds 77 different stocks, with no single holding accounting for more than 2.2% of the ETF’s value. Its top five holdings comprise only about 10% of the fund’s total value. These five companies include Intuitive Surgical, the maker of the da Vinci surgical robot, and four others:
- Novanta (NOVT -1.66%): Novanta specializes in robotics and automation solutions across medicine, manufacturing, and robotics and automation.
- Zebra Technologies (ZBRA -0.55%): A technology company known for products such as barcodes and scanners, RFID tags and transponders, and related tracking devices.
- Fanuc (6954.T): A Japanese company that makes factory automation products including lasers, robots, and ultraprecision machines.
- ServiceNow (NOW 1.88%): One of the largest cloud software providers, ServiceNow has increasingly embraced automation and AI.
Since its inception in 2013, ROBO has underperformed the return of the S&P 500, as the chart below shows. It trails the broad market index, with dividends factored into the return. ROBO pays a dividend yield of 0.05%, and its expense ratio is 0.95%.
ROBO is currently underperforming the S&P 500.
3. iShares Robotics and Artificial Intelligence ETF
3. iShares Robotics and Artificial Intelligence ETF
The iShares Robotics and Artificial Intelligence ETF (IRBO -0.32%) aims to track the results of an index of developed and emerging market companies that could benefit from long-term opportunities in robotics companies and AI.
The ETF was formed in 2018 and has less than $1 billion of assets under management. With 103 stock holdings, it’s now well diversified. Many of its top holdings also give investors exposure to fast-growing small-cap companies.
The fund’s top five investments, which account for about 7% of iShares Robotics’ assets, include Nvidia and four others:
- Lumen Technologies (LUMN 3.53%): The telecom company formerly known as CenturyLink is known for dark fiber, edge cloud, and other broadband and telecom services.
- SiriusXM Holdings (SIRI 0.21%): The satellite radio company known for its satellite technology.
- Genius Sports (GENI -2.85%): A sports betting and sports media business using automatic production and distribution to commercialize video footage of games.
- Hello Group (MOMO 0.59%): The parent of Chinese online dating apps like TanTan and online media business.
- Pegasystems (PEGA 0.74%): A cloud software company focused on automation and AI.
As you can see from the chart below, iShares Robotics has underperformed the S&P 500 since its founding. The ETF fell in 2022 when tech stocks crashed.
iShares Robotics is currently underperforming the S&P 500.
The expense ratio is competitive at 0.47%, and the dividend yield at the time of this writing is 0.8%. The fund’s performance will likely be heavily influenced by the overall performance of cloud stocks since it seems more exposed to cloud stocks and chipmakers than to AI companies.
4. First Trust Nasdaq AI and Robotics ETF
4. First Trust Nasdaq Artificial Intelligence & Robotics ETF
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT -0.12%) tracks the Nasdaq CTA Artificial and Robotics index, which is made up of companies engaged in AI and robotics in technology, industrials, and other sectors.
The fund currently holds 107 stocks, and the top five holdings include ServiceNow and Pegasystems as well as the following:
- SentinelOne (S 2.11%): A cybersecurity software company focused on endpoint security.
- Appian (APPN -0.56%): A cloud software company focused on business process automation through low-code tools and AI.
- Palantir (PLTR 2.49%): A cloud software company known for handling deep research and big data analytics.
Related investing topics
The First Trust ETF offers an expense ratio of 0.65% and a dividend yield of 0.27%. Although its trading history is relatively short, you can see from the chart below that its performance has lagged the S&P 500 recently.
First Trust ETF is currently underperforming the S&P 500.
Should I buy?
Should I buy AI ETFs?
The best way to decide which ETF to buy is to consider which stocks a fund holds and how many of them are true AI companies. A fund’s expense ratio, dividend yield, and past performance are also important, and you can opt to invest in a basket of all four of these AI ETFs to maximize your diversification.
Over time, AI, like chatbots, will grow only smarter and play a greater role in our daily lives. Already AI represents a global market worth hundreds of billions of dollars, and its wide range of practical applications includes face recognition, predictive algorithms in internet search, smart home devices, and autonomous vehicles. So pay attention to the AI market now, and you may find yourself reaping the rewards in years to come.
FAQ
Investing in Artificial Intelligence ETFs: FAQ
Which ETF is best for AI?
AI investors have several options in ETFs. The best-known of the AI ETFs above is Global X, which holds a number of well-known AI stocks, including Nvidia and Intuitive Surgical.
AI investors may also want to consider an ETF that tracks the Nasdaq-100, such as the Invesco QQQ ETF (NASDAQ: QQQ), because big tech companies with exposure to AI make up almost half of the fund.
Does Vanguard have an AI ETF?
Vanguard does not currently offer an AI-focused ETF. However, the asset manager offers an information technology ETF that includes several AI stocks.
What is the best AI to invest in?
The best-known AI stock right now is Nvidia, and it’s also been the most successful stock in AI. Past performance does not guarantee future returns, but it makes sense to invest in ETFs with exposure to Nvidia and other AI chip stocks as they emerge.
Does Charles Schwab have an AI ETF?
Charles Schwab does not have an AI ETF. However, the brokerage firm does have an AI “theme” that contains as many as 25 AI stocks that Schwab account holders can buy together, based on Schwab’s proprietary algorithms and research.
