It’s no secret that exchange-traded funds (ETFs) are among the most popular and fastest-growing investment vehicles today. At the same time, artificial intelligence (AI) has captured a larger and larger share of the attention of tech-focused startups and similar companies. It follows, then, that it was only a matter of time before these two trendy touchstones would intersect.
AI is a branch of computer science that aims to create intelligent, learning machines that are capable of many of the same processes as human beings. ETFs focused in this area of technology could benefit from the continued development and utilization of AI in many sectors, including those incorporating robotics, 3D printing, language processing, social media, self-driving cars and more.
Below, we'll explore some of the leading ETFs that emphasize investing in companies working on AI. The funds on this list are drawn from a report by ETFdb.com and are generally those that specifically invest in companies that develop products related to AI. In some cases, these ETFs have at least 25% portfolio exposure to companies that devote a large percentage of assets toward AI research. In other cases, these ETFs are those that actually make use of AI methodologies to select securities for investment. (See also: How Artificial Intelligence Will Boost These 8 Stocks.)
Here we look at ETFs that invest in AI-related companies. There is also a new class of ETF that uses AI to pick stocks and trade the funds' portfolio, which we do not touch on here. To learn about another intersection between AI and the ETF space, with the technology being used to make investment decisions, check out: Jim Rogers Launches AI-Driven ETF.
- Artiicial intelligence - or AI - is finally becoming a hot commodity for investors seeking to capitalize on the fast-growing technology.
- Several ETFs that focus on the tech sector can give investors a diversified and broad exposure to companies working on AI.
- Some newer ETFs have been introduced that focus more directly on investing in those companies working on AI implementations.
Invesco QQQ (QQQ)
Invesco QQQ is a broad-based equity fund with assets totaling just under $87 billion (all figures as of January 3, 2020). It is intended to track the tech-heavy Nasdaq 100 index. With 104 holdings, QQQ remains particularly focused on the FAANG stocks. As of this writing, Apple Inc. (AAPL) receives a weighting of 11.33%, while Amazon.com, Inc. (AMZN) receives 10.26%, for instance. Other notable companies with links to AI include Intel Corporation (INTC) at 2.89% and Texas Instruments Incorporated (TXN) with a 1.36% weight.
Technology Select Sector SPDR Fund (XLK)
The Technology Select Sector SPDR Fund holds 71 different names. At less than one-third the size of QQQ, XLK has total assets of about $26 billion. Like QQQ, XLK remains primarily focused on top tech names with a link to AI, including Microsoft Corporation (MSFT) and Alphabet Inc. (GOOG). Other companies with ties to AI make their way into XLK's holdings at lower levels, including Oracle Corporation (ORCL) at a 2.05% weighting and Adobe Systems Incorporated (ADBE) with a 1.84% weighting.
Vanguard Information Technology ETF (VGT)
At close to $25.5 billion in size, the Vanguard Information Technology ETF is often overlooked in comparison with some of the other ETFs on this list. VGT is nonetheless a high-performing AI-related ETF,with a broadly diversified portfolio including a basket of more than 325names. The largest of these are Apple (15.04%) and Microsoft (11.65%). A host of smaller weights are assigned to AI-focused tech companies like Broadcom Inc. (AVGO) and International Business Machines Corporation (IBM), too.
Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ)
The Global X Robotics & Artificial Intelligence Thematic ETF is highly specialized, with 39 holdings. At just $1.5 billion in assets, BOTZ is much smaller than its rivals on this list. The largest holdings in BOTZ's basket at this point are NVIDIA Corporation (NVDA) and Intuitive Surgical, Inc. (ISRG), each weighted at more than 10%. Keyence Corporation (KYCCF), Yaskawa Electric Corporation (YASKY) and Fanuc Corporation (FANUY) represent a few of many of the Japanese companies currently in BOTZ's holdings. Indeed, most of the stocks making up the BOTZ portfolio at this point are headquartered in Asia, reflecting the intense focus on AI technology in this part of the world.