You probably interact with artificial intelligence (AI) more often than you think. It's the algorithm arranging your Netflix (NFLX -1.41%) menu, the software expediting your Amazon (AMZN 6.83%) package, and the brains behind many of the smartphone apps you use every day.
Artificial Intelligence
If you've used ChatGPT, the OpenAI chatbot that has wowed users by writing code and instantly answering complex questions, you've gotten a glimpse into the next frontier in artificial intelligence, as big tech companies are racing to develop the leading AI chatbot.
If you want to get portfolio exposure to AI companies but don't want to identify individual AI stocks, you can invest in an AI-focused exchange-traded fund (ETF). AI ETFs provide exposure to a broad range of the best AI companies, eliminating the need to research and choose individual stocks on your own.
Best AI ETFs to buy in 2023
Best AI ETFs to buy in 2023
| AI ETF | Assets Under Management | Expense Ratio |
|---|---|---|
| Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ) | $2.29 billion | 0.69% |
| ROBO Global Robotics and Automation Index ETF (NYSEMKT:ROBO) | $1.4 billion | 0.95% |
| iShares Robotics and Artificial Intelligence ETF (NYSEMKT:IRBO) | $488.21 million | 0.47% |
| First Trust Nasdaq Artificial Intelligence ETF (NASDAQ:ROBT) | $428.28 million | 0.65% |
Keep reading to learn more about each of these artificial intelligence ETFs.
1. Global X Robotics and Artificial Intelligence ETF
1. Global X Robotics & Artificial Intelligence ETF
Established in 2016, the Global X Robotics & Artificial Intelligence ETF (BOTZ -0.31%) is a fund that seeks to "invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence." That includes enterprises working in industrial robotics, automation, non-industrial robots, and autonomous vehicles.
BOTZ currently holds 44 stocks. Its top five holdings, which account for about 40% of the fund's assets, are:
- Keyence (KYCCF 4.54%): A Japanese company that makes factory automation products such as sensors and scanners.
- Fanuc (FANUY -0.08%): Japanese manufacturer of factory automation products including lasers, robots, and electric injection molding machines.
- Intuitive Surgical (ISRG -0.2%): Maker of the da Vinci robotic surgical system, which allows for minimally invasive surgeries with precise control.
- ABB (NYSE:ABB): Swiss maker of industrial automation and robotics products for use in utilities and infrastructure.
- NVIDIA (NVDA 0.43%): Semiconductor maker whose chips are used in a wide variety of applications -- including autonomous vehicles, virtual computing, and cryptocurrency mining -- and are central to many AI technologies.
As the chart below shows, shares of the ETF have underperformed the S&P 500 (SNPINDEX:^GSPC) since its launch in 2016. The share price fell sharply in 2022 in line with the broad sell-off in tech stocks.
BOTZ offered a modest dividend yield of 0.94% at the time of this writing, but it is better suited as a growth-oriented investment. Its expense ratio of 0.68% is higher than what you'd pay for an index fund, but it's also reasonable for the fund's performance history.
2. ROBO Global Robotics and Automation Index ETF
2. ROBO Global Robotics and Automation Index ETF
The ROBO Global Robotics and Automation Index ETF (ROBO -0.53%) is focused on companies driving "transformative innovations in robotics, automation, and artificial intelligence." ROBO invests in companies that are primarily focused on AI, in addition to cloud computing and other technology companies.
Cloud Computing
ROBO holds 80 different stocks, with no single holding accounting for more than 2.2% of the ETF's value. Its top five holdings comprise only about 9% of the fund's total value. These five companies include Fanuc, the Japanese manufacturer described above, and four more:
- Harmonic Drive Systems (OTC:HSYDF): A Japanese company that makes equipment and components for industrial robots, semiconductor manufacturing equipment, and other systems.
- IPG Photonics (IPGP 0.15%): Manufacturer of high-performance fiber lasers used in industries like medical devices and telecommunications.
- Kardex Holding (KRDXF -3.08%): A Swiss logistics company that provides automated storage solutions.
- Samsara (IOT 0.32%): A maker of software that helps track fleets of vehicles and other equipment.
Since its inception in 2013, ROBO has essentially matched the return of the S&P 500, as the chart below shows. It trails the broad-market index with dividends factored into the return. ROBO's dividend yield is 1.42%, and its expense ratio is 0.95%.
3. iShares Robotics and Artificial Intelligence ETF
3. iShares Robotics and Artificial Intelligence ETF
The iShares Robotics and Artificial Intelligence ETF (IRBO -0.18%) aims to track the results of an index of developed and emerging market companies that could benefit from the long-term opportunities in robotics companies and artificial intelligence.
IRBO was formed in 2018 and has less than $1 billion of assets under management. With 118 stock holdings, it's now well-diversified. Many of its top holdings also give investors exposure to fast-growing small-cap companies.
The fund's top five investments, which account for around 6% of IRBO's assets, are:
- Meitu (1357.HK): A Chinese holding company that is best known for its portfolio of photo and community apps.
- iQIYI (IQ 2.35%): A Chinese company that provides a video streaming service and other video entertainment products.
- Spotify (NASDAQ:SPOT): An audio streaming service.
- Sumo Logic (NASDAQ:SUMO): A cloud software company that provides data analytics and log management services.
- Hello Group (MOMO 0.57%): A Chinese online dating company.
As you can see from the chart below, IRBO has underperformed the S&P 500 since its founding. The ETF fell in 2022 when tech stocks crashed.
IRBO's expense ratio is competitive at 0.47%, and its dividend yield at the time of this writing is 1.2%. The fund's performance is likely to be heavily influenced by the overall performance of cloud stocks since it seems more exposed to cloud stocks and chipmakers than AI companies.
4. First Trust Nasdaq AI and Robotics ETF
4. First Trust Nasdaq Artificial Intelligence & Robotics ETF
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT -0.76%) seeks to track the Nasdaq CTA Artificial and Robotics Index, which is made up of companies engaged in artificial intelligence and robotics in technology, industrials, and other sectors.
The ETF, started in 2018, surged during the pandemic, in part because tech stocks make up more than 60% of its holdings. The ETF currently owns 108 stocks, and the top five include:
- C3.ai (AI -1.82%): A cloud software provider of an artificial intelligence platform.
- Atos (AEXAF 9.87%): Atos specializes in digital transformation, helping companies with analytics, AI, and automation.
- Pegasystems (PEGA 1.2%): A provider of a low-code software platform and similar tools.
- ANSYS (ANSS 0.73%): A maker of engineering simulation software.
- Luminar Technologies (LAZR -5.7%): An automotive tech company that provides sensors for passenger cars.
The First Trust ETF offers an expense ratio of 0.65% and a dividend yield of 0.86%. Although its trading history is relatively short, you can see from the chart below that its performance is similar to the S&P 500 overall.
Related artificial intelligence topics
Should you buy AI ETFs?
Should you buy AI ETFs?
The best way to decide which ETF to buy is to consider which stocks a fund holds and how many of them are true AI companies. A fund's expense ratio, dividend yield, and past performance are also important. You can opt to invest in a basket of all four of these artificial intelligence ETFs to maximize your diversification.
Over time, artificial intelligence like chatbots will likely only grow smarter and play a greater role in our daily lives. Already, AI represents a global market worth hundreds of billions of dollars, and its wide range of practical applications includes smartphone face recognition, predictive algorithms in internet search, smart home devices, and autonomous vehicles. So pay attention to the AI market now and you may find yourself reaping the rewards in years to come.
