Funds that invest in AI tend to share an interest in robotics too. (Dreamstime/TNS)

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These ETFs Provide AI Exposure

If you want to invest in Artificial Intelligence, exchange-traded funds deliver a diversity of holdings at a low cost, cutting the risk that you’ll make a concentrated bet on the wrong stock and lose big even if AI continues to take off, notes Kyle Woodley, Kiplinger’s Personal Finance magazine.

Funds that invest in AI tend to share an interest in robotics too; there’s a lot of overlap between the two industries. The ETFs below, all passively managed index funds, have a healthy dose of AI in their portfolios but differ in how much they focus on AI, robotics or both.

Global X Artificial Intelligence & Technology (AIQ): This five-year-old fund invests in companies that are developing AI products and services as well as in companies responsible for hardware that helps facilitate AI for big-data uses. The nearly 90-stock portfolio is made up of firms that concentrate on three main areas: consumer-focused AI, including companies such as Meta Platforms; back-end services, including Salesforce; and hardware manufacturers, such as semiconductor giant Nvidia.

ROBO Global Artificial Intelligence (THNQ): Launched in May 2020, this fund focuses both on companies bringing AI to the masses and other businesses and on companies whose products make AI possible. The ETF sorts its portfolio of nearly 70 stocks into two buckets: infrastructure businesses (61% of assets), ranging from big-data and cloud-computing providers to semiconductor manufacturers; and applications and services businesses (39%), including e-commerce companies, consulting services, factory-automation firms and more.

Each of these companies must check several AI boxes to be considered. Among other things, a firm must have a high level of investment allocated to AI, and AI must contribute a significant amount to revenues. Microsoft, a top-five holding, is considered an AI leader after the recent launch of its ChatGPT-powered Bing AI. Another holding, Shopify, uses artificial intelligence to personalize website experiences.

First Trust Nasdaq Artificial Intelligence and Robotics (ROBT): This fund’s portfolio holds nearly 110 stocks. Foreign stocks account for roughly half of assets. The ETF looks for three types of companies involved in AI, robotics or automation, using a classification system from the Consumer Technology Association.

Enablers develop the building-block components for robotics or AI, such as advanced machinery, autonomous systems, self-driving vehicles, semiconductors and databases used for machine learning. Engagers are companies that design, create, integrate or deliver robotics or AI via products, software or systems. Enhancers are involved with robotics or AI, but not as part of their core business. The fund constructs the portfolio with 60% in Engagers, 25% in Enablers and 15% in Enhancers.

iShares Robotics and Artificial Intelligence Multisector (IRBO): The ETF invests in companies that are considered developers or enablers in both the robotics and artificial intelligence industries. Among the fund’s more than 100 holdings, Chinese internet services giant Baidu has developed a conversational artificial intelligence system dubbed DuerOS. This technology allows humans to talk with or give commands to their personal devices. U.S. stocks account for just over half of assets; China accounts for 12%; Japan, 10%.

Editor’s Note: Kyle Woodley is a contributing writer at Kiplinger Personal Finance magazine, www.Kiplinger.com.