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.
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.
- 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., class A shares of Affirm Holdings Inc., and HengTen Networks Group Ltd., respectively.
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, healthcare, and automobiles.
There are 6 distinct AI ETFs that trade in the U.S., excluding inverse and leveraged funds as well as 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 58.0% over the past 12 months, above the S&P 500's total return of 50.7%, as of April 30, 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 data in the lists below are as of May 3, 2021.
- Performance over 1-Year: 113.8%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.78%
- 3-Month Average Daily Volume: 1,337,467
- Assets Under Management: $3.4 billion
- Inception Date: Sept. 30, 2014
- Issuer: ARK Investment Management
ARKQ holds a basket of multi-cap equities focused on autonomous vehicles, robotics and automation, 3D printing, energy storage, 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; Trimble Inc. (TRMB), a provider of advanced location-based software solutions; and class A sponsored ADRs of JD.com Inc. (JD), a China-based e-commerce company.
- Performance over 1-Year: 104.2%
- Expense Ratio: 0.70%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 36,669
- Assets Under Management: $95.4 million
- Inception Date: July 25, 2018
- Issuer: Innovator Management
LOUP is a multi-cap ETF that tracks the Loup Frontier Tech Index, which gauges the performance of companies at the leading edge of technological innovation. 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 30 stocks with the majority of them based in the U.S. The fund follows a blended strategy, investing in a mix of growth and value stocks. Its top three holdings include class A shares of Affirm Holdings Inc. (AFRM), a fintech company that operates a digital and mobile-first commerce platform; class A sponsored ADRs of HUYA Inc. (HUYA), a China-based video game live streaming platform; and class A sponsored ADRs of Baidu Inc. (BIDU), a China-based company that provides an Internet search engine and other online services.
- Performance over 1-Year: 69.5%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 0.48%
- 3-Month Average Daily Volume: 127,853
- Assets Under Management: $427.2 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 value and growth stocks. Just over half of its 108 holdings are based in the U.S. The fund's top three holdings include HengTen Networks Group Ltd. (136:HKG), a China-based investment holding company that offers a variety of Internet and other services; Teradata Corp. (TDC), a database management company; and 3D Systems Corp. (DDD), a provider of 3D printing equipment and services.
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