Artificial intelligence (AI) exchange-traded funds (ETFs) seek to provide exposure to a fast-growing segment of the technology industry. AI aims to simulate human intelligence, leveraging powerful algorithms to make machines think and act like human beings. While the automation of repetitive tasks and substitution of human labor by machines is nothing new, AI is accelerating this trend, resulting in giant leaps in productivity.
- The AI sector, as represented by the tech sector, outperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are ARKQ, LOUP, and IRBO.
- The top holdings of these ETFs are Tesla Inc., Sponsored ADR Class A shares of Baidu Inc., and 3D Systems Corp., respectively.
For investors optimistic about AI's growth potential, but unsure which companies will outperform, an AI ETF is an option. AI ETFs hold a basket of stocks of companies engaged in some aspect of AI, enabling investors to share in the growth of AI companies' profits without the challenge of trying to separate the winners from the losers.
A special note that some ETFs that use AI as a tool for picking stocks are also sometimes referred to as AI ETFs. But this story focuses on ETFs targeting companies that use AI for other industries, such as robotics, automation, health care, and automobiles.
There are 6 distinct AI ETFs that trade in the U.S., excluding inverse or leveraged funds and those with less than $50 million in assets under management (AUM). The AI sector does not have its own benchmark, but its performance is best reflected in the index for the technology sector, the Technology Select Sector SPDR ETF (XLK). XLK has outperformed the broader market with a total return of 40.4% over the past 12 months, more than double the S&P 500's total return of 19.1%, as of February 1, 2021. The best-performing AI ETF, based on performance over the past year, is the ARK Autonomous Technology & Robotics ETF (ARKQ). We examine the 3 best AI ETFs below. All numbers below are as of February 2, 2021.
- Performance over 1-Year: 138.3%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.75%
- 3-Month Average Daily Volume: 866,792
- Assets Under Management: $2.8 billion
- Inception Date: September 30, 2014
- Issuer: ARK Investment Management
ARKQ holds a basket of multi-cap equities focused on autonomous vehicles, robotics and automation, 3D printing, and space exploration. Until November of 2019, the fund was called the ARK Industrial Innovation ETF. ARKQ is an actively managed ETF that employs a growth strategy and is geographically diversified across developed markets throughout the world. The fund's top three holdings include Tesla Inc. (TSLA), an electric vehicle and clean energy company; sponsored ADRs of Materialise NV (MTLS), a Belgium-based provider of additive manufacturing software and 3D printing services; and Sponsored ADR Class A shares of Baidu Inc. (BIDU), a Chinese multinational technology company.
- Performance over 1-Year: 102.6%
- Expense Ratio: 0.70%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 26,394
- Assets Under Management: $71.6 million
- Inception Date: July 25, 2018
- Issuer: Innovator Management
LOUP is a multi-cap blended fund which tracks the Loup Frontier Tech Index. The index holds a basket of companies representing AI technology as well as robotics, autonomous vehicle technology, virtual reality, and similar technologies. LOUP holds approximately 31 stocks with nearly half of invested assets in the top 10 holdings. The top three holdings include Sponsored ADR Class A shares of Baidu; Sponsored ADR Class A shares of HUYA Inc. (HUYA), the Chinese live streaming company; and Axon Enterprise Inc. (AXON), the maker of weapons and technology for military and law enforcement applications.
- Performance over 1-Year: 68.0%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 0.48%
- 3-Month Average Daily Volume: 87,232
- Assets Under Management: $335.7 million
- Inception Date: June 26, 2018
- Issuer: iShares
IRBO seeks to track the NYSE FactSet Global Robotics and Artificial Intelligence Index, an index composed of companies engaged in robotics and AI across a broad range of developed and emerging market economies. The ETF invests in a range of multi-cap equities and follows a blended strategy of investing in both growth and value stocks. The fund's top three holdings include 3D Systems Corporation (DDD), a provider of 3D printing equipment and services; Stratasys Ltd. (SSYS), an American-Israeli maker of 3D printers and related equipment; and Class A shares of MicroStrategy Inc. (MSTR), the business intelligence and cloud services company.
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