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The artificial intelligence (AI) revolution is reshaping industries and presenting unmatched investment opportunities. From self-driving cars to smart factories, AI and robotics are changing the way we live, work, and invest. However, selecting the best AI stock for your specific needs may appear to be a daunting task. That’s where exchange-traded funds (ETFs) come in. They’re a smart, diversified way to capitalize on this transformative trend’s potential for decades.
Whether you’re a seasoned investor or just getting started in this booming space, AI-focused ETFs could help you build long-term gains.
AI ETF #1: iShares Robotics and Artificial Intelligence ETF
The iShares Robotics and Artificial Intelligence Multisector ETF (ARTY) is a passively managed, globally diversified, and cost-efficient way to invest in AI. Managed by BlackRock (BLK), this ETF tracks companies involved in robotics and AI technologies across the world. Last year, it switched from tracking the NYSE FactSet Global Robotics and Artificial Intelligence Index to the Morningstar Global Artificial Intelligence Select Index, which reflects a more focused AI theme.
ARTY is up more than 50% in the last three years and about 11% year to date, comfortably outperforming the broader market.
With an expense ratio of only 0.47%, which is the annual fee that the fund charges its investors to cover its operating expenses, ARTY keeps costs low, which is beneficial to long-term investors.
The fund’s top holdings currently include well-known AI and chip companies such as Nvidia (NVDA), Advanced Micro Devices (AMD), Broadcom (AVGO), and Super Micro Computer (SMCI), as well as rising stars such as Vertiv (VRT) and Arista Networks (ANET). ARTY’s mix of established and emerging players, global reach, and low fees make it an appealing option for those seeking broad exposure to AI and robotics.
AI ETF #2: Global X Robotics & Artificial Intelligence ETF
The Global X Robotics & Artificial Intelligence ETF (BOTZ) may be a good choice for investors looking to align with industry leaders in robotics and automation. This ETF tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index, which focuses on companies that are already making significant moves in the AI and robotics industries.
This ETF provides investors with exposure to established companies with real-world AI applications, ranging from medical robots to industrial automation systems, that are profitable, innovative, and heavily invested in R&D.
BOTZ has returned 57% over the last three years but is only up 1.2% year to date, trailing the market.
The top holdings in the BOTZ portfolio include Nvidia, which has a weighting of more than 10%; ABB, (ABBNY) a Swiss robotics leader with an 8.2% weighting; and Intuitive Surgical (ISRG), a pioneer in robotic surgery with a weighting of 7.6%. While BOTZ has a slightly higher expense ratio of 0.68%, investors gain access to companies that are already generating real revenue from AI and robotics, rather than just future potential. It’s an excellent choice for those looking to play the long-term AI theme through a more mature set of companies.
AI ETF #3: ARK Autonomous Technology & Robotics ETF
Another daring choice among AI-focused ETFs is the ARK Autonomous Technology & Robotics ETF (ARKQ), which is actively managed. This ETF covers a wide range of exciting industries, including autonomous vehicles, robotics, 3D printing, energy storage, and even space exploration. It is managed by ARK Invest and led by renowned investor Cathie Wood, who is known for making risky, research-intensive investments in disruptive innovation. ARKQ, unlike most ETFs, does not track a traditional index. Instead, the fund managers carefully select companies that they believe will shape the future through innovation and disruption.
ARKQ has returned a whopping 355% over the last decade and 73% over the past three years. It’s up 14.5% year to date, outperforming the broader market.
Although holdings change due to ARKQ’s active management, current top holdings include Tesla (TSLA), Kratos Defense & Security (KTOS), Teradyne (TER), Archer Aviation (ACHR), Palantir (PLTR), Rocket Lab (RKLB), and Amazon (AMZN).
ARKQ’s expense ratio is on the high side at 0.75%, but this compensates for the team’s hands-on approach and extensive research into emerging technology. If you are a long-term investor who believes in AI, autonomy, and innovation and is willing to handle the risk of a more actively managed fund, ARKQ could be a high-reward addition to your portfolio.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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