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 outperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are ARKQ, BOTZ, and IRBO.
- The top holdings of these ETFs are Tesla Inc., NVIDIA Corp., and class A shares of Pinterest Inc., 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 5 distinct AI ETFs that trade in the U.S., excluding 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). The XLK has outperformed the broader market with a total return of 41.8% over the past 12 months, more than double the S&P 500's total return of 18.1%, as of November 13, 2020. 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 November 16, 2020.
- Performance over 1-Year: 83.3%
- Expense Ratio: 0.75%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 267,655
- Assets Under Management: $861.2 million
- 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 class C shares of Alphabet Inc. (GOOG), a multinational technology conglomerate and parent of Google.
- Performance over 1-Year: 43.2%
- Expense Ratio: 0.68%
- Annual Dividend Yield: 0.32%
- 3-Month Average Daily Volume: 1,134,233
- Assets Under Management: $2.0 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; FANUC Corp. (6954:TKS), a Japan-based manufacturer of factory automation systems, equipments, and robots; and Intuitive Surgical Inc. (ISRG), a maker of robotic products used in minimally invasive surgery.
- Performance over 1-Year: 40.8%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 0.30%
- 3-Month Average Daily Volume: 55,545
- Assets Under Management: $219.7 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 class A shares of Pinterest Inc. (PINS), a social media company providing a pinboard-style photo-sharing website; class A shares of Snap Inc. (SNAP), a social media company that develops mobile camera application products and services; and Nidec Corp. (6594:TKS), a Japan-based manufacturer of small precision motors mainly used in HDD and optical disk drives.
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