Picking the Best AI ETFs

What Is Artificial Intelligence, and Why Invest in AI ETFs?

Check out some of best AI ETFs and see if these funds are right for your investment goals. Photo: Getty Images

AI ETFs are exchange-traded funds that invest in stocks of companies operating in the business of artificial intelligence, such as robotics, navigational systems, automated machines, vehicles, and machine learning used for big data-focused processes in all industries. AI ETFs may concentrate all of their holdings on AI stocks or include other technology-related stocks. Find out if AI ETFs are right for you.

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:

  • Focused AI ETFs: These are ETFs that invest specifically in companies involved in products or services related to artificial intelligence. These funds typically have 100 percent exposure to AI stocks.
  • Limited Exposure AI ETFs: These funds have at least 25% of portfolio exposure to companies that use AI technology. Examples of such companies are Amazon (AMZN), Tesla Motors (TSLA), Apple (AAPL), and Alphabet (GOOG, GOOGL).
  • AI-Managed Funds: These funds may not invest in AI stocks but the fund itself utilizes AI technology to select the individual securities to be held in the fund.

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.

Use Caution When Investing in AI ETFs

It's important to note that, although artificial intelligence may shows great promise for growth, this sector of the market and the ETFs investing in AI are relatively new. Investments without long performance histories, such as 10 years or more, may carry more market risk than investments with proven track records. 

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.

Frequently Asked Questions (FAQs)

What is artificial intelligence?

Artificial intelligence refers to any machine-based system that uses human-based objectives to make predictions, recommendations, or decisions that influence real or virtual environments. In making these predictions, recommendations, and decisions, a computer replicates intelligent human behavior to some degree. AI touches many aspects of daily life, from mapping technologies in our smartphones to trading that drives financial markets.

What is the difference between machine learning and artificial intelligence?

Machine learning is a type of artificial intelligence. It aims to give computers the ability to learn things they weren't specifically programmed to learn. Human programmers give data to a machine-learning computer, and the computer uses that data to train itself to find patterns and make predictions.

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.

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Franklin Templeton. "Artificial Intelligence: Real Opportunity."

  2. CMO by Adobe. "5 Examples Of AI In Our Everyday Lives."

  3. Franklin Templeton. "The Real Feel: How Will AI Affect Us?"

  4. Admiral Markets. "What You Need to Know Before Investing in AI Stocks."

  5. The Vanguard Group. "Learn What An ETF Is."

  6. Global X. "Robotics & Artificial Intelligence ETF (BOTZ)."

  7. ROBO Global. "ROBO Global Robotics and Automation ETF," Page 1.

  8. ROBO Global. "ROBO Global Robotics and Automation ETF."

  9. AIIQ by EquBot. "AIIQ Factsheet," Page 1.

  10. AIIQ by EquBot. "EquBot Announces the Launch of the AI Powered International Equity ETF (AIIQ)."

  11. AIIQ by EquBot. "Fund Summary."

  12. Department of State. "Artificial Intelligence (AI)."

  13. MIT Sloan School of Management. "Machine Learning, Explained."

Related Articles