Outlook for Artificial Intelligence and AI ETFs
The world of artificial intelligence (AI) is still in its infancy but shows great promise for the future, which makes AI a compelling investment idea. The beginnings of AI can be seen in today’s technology with interactive, voice-powered personal assistants like Siri and Alexa, automated cars, and suggested search ideas in search engines like Google. But the artificial intelligence of the future will be devices that can learn, attach meanings to new experiences, and get smarter and more aware, much like humans do. This will likely be the next phase of the digital age. The computers of tomorrow will be able to solve problems or find cures for diseases, making today’s technology obsolete and opening doors for more growth in the AI sub-sector of technology.
How to Invest in Artificial Intelligence
Arguably, the best way to invest in AI technology is to invest in AI ETFs. This is because, as with other concentrated sectors that are still in the infancy stage of the business cycle, it is inherently difficult and risky to attempt to pick individual companies that will lead the industry. When you invest in an AI ETF, you’ll typically get exposure to dozens of stocks, which will reduce overall market risk by placing bets on more than just one stock. This is especially important since the industry is new and the best in breed players inside it are not identified yet.
Picking the Best AI ETFs
Identifying the best AI ETFs on the investor level is a subjective exercise. For example, some investors may want a fund that focuses primarily on AI stocks, while others may want a tech stock fund that only allocates a portion of the fund’s assets to AI stocks. There are also funds that use artificial intelligence to choose the holdings. Here is a summary of the basic types of artificial intelligence ETFs: In no particular order, here are some of the best AI ETFs to buy now:
Global X Robotics & Artificial Intelligence Thematic (BOTZ): One of the larger AI ETFs, BOTZ has over $1.40 billion in assets under management. According to Global X, the fund seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles. Expenses for the fund are 0.68%, or $68 per $10,000 invested. Robo Global Robotics & Automation Index (ROBO): The first robotics and automation ETF to come to market, ROBO concentrates holdings on companies that work in industries related to robotics, automation, and artificial intelligence all around the world. ROBO holds over 80 stocks, diversified across small-, mid-and large-cap stocks. ROBO has $1.19 billion in assets under management, and the expense ratio for ROBO is 0.95 percent. EquBot AI Powered EQ International ETF (AIIQ): This ETF does not seek to purchase stocks of companies in the AI industry but rather uses the power of artificial intelligence to pick stocks to be held in the fund. The underlying fund investments in AIIQ are based on the results of proprietary quantitative models developed by Equbot with IBM Watson artificial intelligence. The actively-managed, AI-driven methods will create a portfolio of between 80 and 250 stocks, choosing from more than 15,000 companies across the globe, as it sifts through information, learning from its processes. Assets under management for AIIQ are relatively small at $3.66 million, and the expense ratio is 0.79 percent.
Bottom Line
The bottom line on AI funds is that there is potential for increased demand for robotics, automation, and artificial intelligence in the future. Therefore, the growth potential for AI stocks and AI ETFs is significant, although market risk is generally higher than more diversified investments. Investors should use caution in adding narrowly focused sector funds, such as AI ETFs, to a portfolio. The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.
