Best AI ETFs for Q4 2022

KOMP, ROBO, and ROBT are the best AI ETFs for Q4 2022

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. Though 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.

For investors who are optimistic about AI’s growth potential but unsure about which companies will perform best, an AI ETF is an option. AI ETFs hold a basket of stocks in companies that are 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.

Key Takeaways

  • The artificial intelligence (AI) sector underperformed the broader market over the past year.
  • The AI exchange-traded funds (ETFs) with the best one-year trailing total returns are KOMP, ROBO, and ROBT.
  • The top holding of the first of ETF is Teledyne Technologies Inc. and the top holding of the other two funds is iRobot Corp.

A special note: 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, healthcare, and automobiles.

There are six distinct AI ETFs that trade in the United States, excluding inverse and leveraged funds as well as those with less than $50 million in assets under management (AUM). The benchmark Nasdaq CTA Artificial Intelligence and Robotics Index has underperformed the broader market with a total return of -31.0% over the past 12 months, well below the S&P 500’s total return of -8.1%, as of Sept. 9, 2022.

The best-performing AI ETF, based on performance over the past year, is the SPDR S&P Kensho New Economies Composite ETF (KOMP). We examine the three best AI ETFs below. All data in the lists below is as of Sept. 8, 2022. In order to focus on the funds' investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large.

SPDR S&P Kensho New Economies Composite ETF (KOMP)

  • Performance Over One-Year: -30.7%
  • Expense Ratio: 0.20%
  • Annual Dividend Yield: 1.03%
  • Three-Month Average Daily Volume: 109,248
  • Assets Under Management: $1.7 billion
  • Inception Date: Oct. 22, 2018
  • Issuer: State Street

KOMP is a multi-cap, blended fund tracking the S&P Kensho New Economies Composite Index. The index is composed of companies that exploit major advancements in processing power, AI, automation, and robotics. The fund holds stocks domiciled in both developed and emerging markets. Aerospace & defense, application software, and electronic equipment & instruments stocks make up the three largest portions of the portfolio. The top holdings of KOMP include Teledyne Technologies Inc. (TDY), a maker of aerospace and defense electronics, digital imaging, and related solutions; Elbit Systems Ltd. (ESLT:TAE), an Israel-based defense technologies company; and Leidos Holdings Inc. (LDOS), a defense, aviation, IT, and biomedical research company.

ROBO Global Robotics & Automation Index ETF (ROBO)

  • Performance Over One-Year: -32.7%
  • Expense Ratio: 0.95%
  • Annual Dividend Yield: 0.17%
  • Three-Month Average Daily Volume: 85,419
  • Assets Under Management: $1.2 billion
  • Inception Date: Oct. 22, 2013
  • Issuer: Exchange Traded Concepts

ROBO seeks to track the ROBO Global Robotics & Automation Index, which gauges the performance of companies engaged in robotics, automation, and AI. The ETF provides exposure to companies developing intelligent systems technology capable of sensing, processing, and acting, as well as to companies that apply that technology. The ETF follows a blended strategy of investing in a mix of value and growth stocks. It is diversified across a range of market capitalizations and developed markets, with its top 10 stocks accounting for only 19.1% of the portfolio. The fund's top three holdings are iRobot Corp. (IRBT), a maker of consumer robots; Harmonic Drive Systems Inc. (6324:TKS), a Japan-based maker of components for industrial robots, semiconductor manufacturing equipment and other products; and Rockwell Automation Inc. (ROK), a maker of industrial automation products and software.

First Trust Nasdaq Artificial Intelligence & Robotics ETF (ROBT)

  • Performance Over One-Year: -33.4%
  • Expense Ratio: 0.65%
  • Annual Dividend Yield: 0.15%
  • Three-Month Average Daily Volume: 26,270
  • Assets Under Management: $192.2 million
  • Inception Date: Feb. 21, 2018
  • Issuer: First Trust

ROBT seeks to track the Nasdaq CTA Artificial Intelligence and Robotics Index, the benchmark index provided above. The index is focused on companies engaged in AI, automation or robotics that are classified by the Consumer Technology Association. These include companies that: develop the building blocks for AI; design, and create AI software and systems; and provide services within the AI space. Companies must have a minimum market capitalization of $250 million and must also meet minimum average trading volumes and free float levels. U.S.-based stocks account for over 52% of ROBT's portfolio, followed by companies based in Japan, France, and the U.K. The top holdings of ROBT include iRobot; AVEVA Group PLC (AVV:LON), a British multinational information technology company; and Cadence Design Systems Inc. (CDNS), a multinational computational software company.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Article Sources
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