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 ETFs with the best 1-year trailing total return are ARKQ, BOTZ, and IRBO.
- ARKQ, the top AI ETF, has dramatically outperformed the broader market over the past year.
- The top holdings of these ETFs are Tesla, NVIDIA, and Xiaomi, 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.
The AI ETF universe is comprised of about 7 distinct ETFs, excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). The best AI ETF, based on performance over the past year, is the ARK Industrial Innovation ETF (ARKQ). It has dramatically outperformed the broader market as measured by the S&P 500's one-year total return of 22.9%, as of September 1, 2020. We examine the three best AI ETFs below. All numbers below are as of September 2, 2020.
- Performance over 1-Year: 97.7%
- Expense Ratio: 0.75%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 189,173
- Assets Under Management: $636.0 million
- Inception Date: September 30, 2014
- Issuer: ARK Investment Management
ARKQ, also known as the Autonomous Technology & Robotics ETF, holds a basket of multi-cap equities focused on autonomous vehicles, robotics and automation, 3D printing, and more. It uses 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; 2U Inc. (TWOU), a provider of education technology for nonprofit colleges and universities; and Materialise NV (MTLS), a Belgium-based provider of additive manufacturing software and 3D printing services.
- Performance over 1-Year: 46.8%
- Expense Ratio: 0.68%
- Annual Dividend Yield: 0.35%
- 3-Month Average Daily Volume: 843,386
- Assets Under Management: $1.7 billion
- Inception Date: September 12, 2016
- Issuer: Global X
BOTZ seeks to track the Indxx Global Robotics & Artificial Intelligence Thematic Index, comprised of companies operating in the global automation and robotics industries. The ETF is focused on companies poised to benefit from increased adoption and use of robotics and AI, including ones focused on industrial robotics and automation, non-industrial robots, and autonomous vehicles. The fund is composed of multi-cap equities and follows a blended strategy, investing in a mix of growth and value stocks across developed markets. The fund's top three holdings include NVIDIA Corp. (NVDA), a semiconductor company; Intuitive Surgical Inc. (ISRG), a maker of robotic products used in minimally invasive surgery; and ABB Ltd. (ABBN), a Switzerland-based multinational corporation that provides power and automation technologies.
- Performance over 1-Year: 43.2%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 0.32%
- 3-Month Average Daily Volume: 45,074
- Assets Under Management: $186.7 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 Xiaomi Corp. (1810: HKG), a China-based manufacture of communication equipment; DouYu International Holdings Ltd. (DOYU), a China-based provider of a game-centric live streaming platform for personal computers and mobile apps; and Mail.ru Group Ltd. (MAIL), a Russia-based developer of Internet communications and entertainment services.