When in 1950 Alan Turing British mathematician and World War II code-breaker came up with the idea of machines that could think, he was ridiculed. Yet unknowingly, he set the wheels in motion so that what was once the stuff of science fiction and a figment of the imagination, has now taken root in our daily lives. And although we might be a few years away from having robots at our beck and call, artificial intelligence’s (AI) influence is hard to miss. From weather forecasts and email spam filtering to Google’s search predictions and voice recognition, such as Apple’s Siri, all these technologies have machine-learning algorithms that enable them to react and respond in real time. Moreover, machine-learning technologies are driving increases in productivity like never seen before.
With so much potential ahead, it’s getting increasingly harder to imagine a future without AI or an investment portfolio that doesn’t contain at least some exposure to the sector. For investors looking to invest in the industry but don’t wish to bet their money on individual companies, AI-focused ETFs are good alternatives.
Below is an outlook of some of these top artificial intelligence exchange-traded funds.
Why invest in AI?
Artificial intelligence refers to the systems designed to mimic the human brain and aims to simulate human intelligence, leveraging powerful algorithms to make machines think and act like human beings. Although the automation of repetitive tasks and substitution of human labour by machines is nothing new, AI is accelerating this trend, boosting our productivity even further. Meanwhile, the industry is growing by leaps and bounds. The global AI market size was valued at $62.35 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 40.2% from 2021 to 2028, while the global AI software market is forecast to grow rapidly in the coming years, reaching around $126 billion by 2025.
Constantly evolving and improving, while already boosting several industries including tech, telecommunications, finance, medicine, manufacturing, computer science, psychology and many others, without a doubt, AI is poised to become a major driver of innovation and growth.
What are AI ETFs?
From automation like completing tasks on an assembly line to improved data analysis and driving a vehicle on the freeway, nearly every company uses AI in one way or another and in all likelihood, if you own shares of Facebook (FB), Google (GOOG/GOOGL) or even Ford (F), you already have some form of exposure, directly or indirectly in the sector.
Breakthroughs in in the industry will undoubtedly impact both society and your portfolio, particularly if you invest in the right names. AI ETFs hold a basket of stocks in AI-related companies, enabling investors to share in the growth of these companies’ profits, without the challenge of having to separate the winners from the losers.
What are the benefits of investing in AI ETFs?
Often, the problem for investors seeking to go long on artificial intelligence is the fact that many pure play AI and robotics stocks are small, obscure companies that can be volatile and may risk going under before their technology is even brought to market. AI ETFs can solve this problem by investing in a variety of stocks, which can help investors diversify across the industry, reducing single company risk.
Top AI ETFs
ARK Autonomous Technology & Robotics ETF (ARKQ)
Performance over 1 year (NAV): 84.21% annualised (as of June 30, 2021)
Expense Ratio: 0.75% (as of June 30, 2021)
An actively managed ETF that seeks the long-term growth of capital, the fund invests at least 80% of its assets in domestic, as well as foreign equity securities of autonomous technology and robotics companies that are relevant to the fund’s investment theme of disruptive innovation. In other words, these companies develop, produce or enable autonomous transportation, robotics and automation, 3D printing, energy storage and space exploration. At the same time, they are expected to benefit from the developments of new products or services, technology improvements and advancements in scientific research related to energy, automation and manufacturing, materials and transportation, among other things.
As expected, the ETF centres primarily on the information technology sector which accounts for 28.6% of the fund, followed by consumer discretionary at 27.3% and industrials. As a result, investors should expect big tech names like the likes of Tesla (TSLA), UIPath (PATH), Palantir (PLTR) and others, together with industrial players like Deere & Co (DE), amongst others. The ETF is focused heavily in the U.S., approximately 72.5%, followed by Asia Pacific at 20.5%, Western Europe at 3.5% and Africa and the Middle East region, which together make up 3.2% of the ETF’s geographic exposure.
Below is a breakdown of the ETF’s top five holdings:
|KTOS||KRATOS DEFENSE & SECURITY||6.39%|
|IRDM||IRIDIUM COMMUNICATIONS INC||4.98%|
Is the ARK Autonomous Technology & Robotics ETF a buy?
The ETF employs a growth strategy, while it is geographically diversified across developed markets throughout the world and like many ETFs in the global technology segments, it doesn’t provide broad exposure to tech companies. On the contrary, it uses its own internal research and analysis to select firms that have the potential to capitalise on disruptive innovation which in turn enables development in the markets they operate.
Then there is the fact that the ETF belongs to advisory firm Ark Invest. Led by celebrated U.S. investor Catherine Wood, the company has an impressive track record at beating the market and in effect, in the three years through March 2020, the ETF has outperformed passive rivals like the Global X Robotics & Artificial Intelligence ETF (BOTZ) and the ROBO Global Robotics & Automation Index ETF (ROBO) mentioned further down.
In terms of the MSCI ESG rating, the Ark Autonomous Technology & Robotics ETF has a rating of A based on a score of 6.42 out of 10, a relatively high score when considering that an AAA score is regarded as the best, while a CCC as the worst.
Head over to Moneybase Invest to add ARK Autonomous Technology & Robotics ETF (ARKQ) here.
Invesco QQQ Trust ETF (QQQ)
Performance over 1 year (NAV): 44.06% (as of June 30, 2021)
Expense Ratio: 0.20% (as of June 30, 2021)
The Invesco QQQ tracks the Nasdaq 100 index, which is regarded as one of the three benchmarks used to measure the market at any given time, while it invests in around 100 of the largest, non-financial companies listed on the Nasdaq based on market cap. Although the ETF does not feature AI-related buzzword terminology like robotics and automation, it does provide exposure to companies that have the means and resources at hand to advance AI technology.
The ETF invests heavily in information technology, which accounts for 48.82% of the fund, however, it also covers underlying holdings from multiple sectors and industries, such as communication services that accounts for 19.53%, as well as consumer discretionary at 17.42% and health care at 6.7%. Two more sectors the ETF invests in are consumer staples, as well as industrials and utilities. Naturally, the ETF has a sizable allocation to Big Tech, with FAANG stocks featuring prominently
The ETF’s top five holdings consist of:
|GOOG||ALPHABET INC – CLASS C||3.90%|
Is the Invesco QQQ Trust ETF a buy?
The ETF’s composition is certainly what makes this investment unique, as it maintains a hefty allocation to tech stocks, while it is one of the few ETFs that is structured as a unit investment trust. What’s more, the Invesco QQQ Trust is considered one of the best-established and one of the most actively traded ETFs in the world, so much so, that its average daily trading volume is quite significant. This could be an indication that it serves as a great trading vehicle, however, it certainly can be useful as part of a buy-and-hold approach for investors looking to maintain their exposure to the tech sector.
Meanwhile, the ETF has a score of 5.44 out of 10 on the MSCI ESG Fund Rating, which means that the resiliency of portfolios to long-term risks and opportunities arising from environmental, social and governance factors is a relatively good one and therefore, companies the fund invests in appear to show strong or improving management of these issues.
Interested to invest? To buy Invesco QQQ Trust ETF (QQQ), click here.
iShares Robotics and Artificial Intelligence Multisector ETF (IRBO)
Performance over 1 year (NAV): 52.92% (as of June 30, 2021)
Expense Ratio: 0.47% (as of June 30, 2021)
Offering exposure to companies at the forefront of both robotics and artificial intelligence innovation, the ETF is a global fund that follows companies from both developed and emerging markets, while it tracks an underlying index, which uses company filings and public disclosures to identify eligible stocks. To be selected, a company must either earn 50% of its revenue, have a 20% market share or generate $1 billion in annual revenue from one of the 22 RBRICS (Revere Business Industry Classification System) with exposure to the robotics and artificial intelligence theme.
However, unlike the ARKQ and QQQ ETFs, the iShares Robotics and Artificial Intelligence ETF is an equal-weighted index, which means that each of its 106 holdings have the same allocation. Information technology makes up around 60.54% of the fund, whereas communication 20.26%. Meanwhile, industrial occupies 11% of the ETF, followed by health care at 1.64% and cash or derivatives at 0.26%. On the other hand, geographically it leans heavily on the U.S., followed by China, Japan and Taiwan. Other European countries that are also covered include France, Switzerland and Germany.
The following are the ETF’s top five holdings:
Is the iShares Robotics and Artificial Intelligence Multisector ETF a buy?
The iShares Robotics and Artificial Intelligence ETF has outperformed the S&P 500 since the start of the pandemic thanks to the great performance of cloud computing companies. Indeed, considering a hypothetical investment of $10,000 on the ETF’s inception in 2018 and assuming the reinvestment of dividends and capital gains, the initial investment would be worth $18,973.52 on September 17, 2021, marking an 89.74% increase. Meanwhile, its expense ratio is a competitive 0.47%, while its 12-month trailing yield at the time of writing is at 0.58%.
The ETF’s Peer Mark, which reflects the ranking of a fund’s MSCI ESG Fund Quality Score against that of other funds within the same peer group as defined by the Thomson Reuters Lipper Global Classification is on the 36th percentile within its peer group and in the 47th percentile within the global universe of all funds covered by this rating. On the other hand, the ETF’s MSCI ESG Fund Rating is of BBB based on a score of 5.63 out of 10.
Interested? To add the iShares Robotics and Artificial Intelligence ETF (IRBO) to your portfolio, head over to Moneybase Invest.
ROBO Global Robotics & Automation Index ETF (ROBO)
Performance over 1 year (NAV): 39.55% (as of August 31, 2021)
Expense Ratio: 0.95% (as of September 20, 2021)
The ETF tracks the ROBO Global Robotics & Automation Index, a global index that gauges the performance of companies engaged in robotics, automation and artificial intelligence. As a result, it offers exposure to companies developing intelligent systems technology capable of sensing, processing and acting, as well as those that use and apply this technology. The index is an equal-weighted one that is made up of both U.S. and international stocks that derive from both developed and emerging markets. With the aim to capture the returns of these companies, the ETF uses both a qualitative and quantitative research to identify market leaders in the industry, while it includes a mix of value and growth stocks.
Diversified across a range of market capitalisations and developed markets, the ETF invests in the U.S., as well as in Japan, Germany, Switzerland, Taiwan, the UK, Canada and other countries. In addition, securities are equally weighted within their segment and although the ETF doesn’t include any household names, it consists of smaller, foreign companies that have potential.
The ETF’s top five holdings consist of:
|BRKS||BROOKS AUTOMATION INC||2.04%|
|IRTC||IRHYTHM TECHNOLOGIES INC||1.91%|
|ISRG||INTUITIVE SURGICAL INC||1.63%|
Is the ROBO Global Robotics & Automation Index ETF (ROBO) a buy?
Although strictly speaking not a pure-play artificial intelligence ETF, AI is part of the game, while the fact that it is fairly diversified since it covers a range of sectors including health care, logistics automation, 3D printing and consumer-product stocks, amongst other sub-sectors, makes it highly appealing. At the same time, ROBO has pretty much matched the return of the S&P 500 since its inception in 2013.
In terms of the ETF’s MSCI ESG Fund Rating, this is relatively high, currently standing at an A based on a score of 6.15 out of 10, which means that the companies the fund invest in are resilient and can effectively manage financially relevant environmental, social and governance issues. On the other hand, when compared within the same peer group, the ROBO Global Robotics and Automation Index ETF ranks in the 51st percentile, while it occupies the 61st percentile within the global universe of all funds covered by the MSCI ESG Fund Ratings.
Click here to buy the ROBO Global Robotics & Automation Index ETF (ROBO).
Global X Robotics & Artificial Intelligence ETF (BOTZ)
Performance over 1 year (NAV): 46.52% (as of June 30, 2021)
Expense Ratio: 0.68% (as of September 20, 2021)
Established in 2016, the Global X Robotics & Artificial Intelligence ETF invests in companies that have the potential to benefit from the increased adoption, as well as use of robotics and AI, while it also invests in those firms that are involved in industrial robotics and automation, non-industrial robots, as well as autonomous vehicles. The ETF tracks the price and yield performance before fees and expenses of the Indxx Global Robotics & Artificial Intelligence Thematic Index.
In addition, the Global X Robotics & Artificial Intelligence ETF provides market cap selected and weighted international exposure and while 45.2% of the fund invests in the U.S., Japan is the second country most invested in, at 34.9%, followed by Switzerland at 12.2% and Britain at 2.8%. Other countries covered include Canada, Finland, Israel and South Korea. Leaning heavily towards industrial and technology, these two sectors occupy 37.8% and 34.7% respectively. Health care, communication services, consumer discretionary and energy are also covered. Some top names include Nvidia (NVDA) and ABB (ABB) and others.
Below is a breakdown of the ETF’s top five holdings:
|UPST||UPSTART HOLDINGS INC||9.67%|
|ISRG||INTUITIVE SURGICAL INC||7.89%|
Is the Global X Robotics & Artificial Intelligence ETF a buy?
According to experts, the global robotics market could reach $74 billion by 2026. At the same time, when considering that the average cost of an industrial robot is constantly declining, this could spell broader adoption across several industries. Indeed, whereas the average cost of an industrial robot was $46,000 in 2010, this dipped to $27,000 in 2017 and prices are expected to drop even further, below $11,000 by 2025. Needless to say, the sector’s high growth potential bodes well for the ETF.
What’s more, the Global X Robotics & Artificial Intelligence ETF’s price has soared since the pandemic-related market bottom that took place in March 2020. On March 20, 2020, the ETF was trading at $15.55, however, its current price is that of $38.69 on September 22, 2021. Lastly, the ETF provides exposure to a fast-growing slice of the market at a price that can be cheaper when compared to certain rivals like the ROBO Global Robotics and Automation Index ETF mentioned above.
To add the Global X Robotics & Artificial Intelligence ETF (BOTZ), click here.
How to invest in Artificial Intelligence ETFs with Moneybase Invest
Ready to invest in these top artificial intelligence ETFs? Your first step to tapping into a world of investment opportunities with Moneybase Invest is to sign up and open an account.
To do so:
- Download the app from either Google Play or the Apple App Store. Alternatively, you may access Moneybase Invest on your desktop by visiting https://live.cctrader.com/
- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the company name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. The ETF has been added to your portfolio.
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The contents of this article are not intended to be taken as a personal recommendation to invest but strictly based on research and for information purposes only. Retail investors should contact their financial adviser for a suitability assessment prior to taking any investment decisions.