Nowadays, discussions surrounding technology seem to commonly venture in the direction of artificial intelligence (AI). AI isn't new, but thanks to the popularity of OpenSea's ChatGPT -- a highly versatile conversational AI chatbot -- it's become a more mainstream topic.
The AI industry has grown a lot in the past few years, and it's seemingly going from side projects for big tech to a necessity for long-term competitiveness. Alphabet's Google even had to issue a "code red" because of the threat ChatGPT and its popularity could pose to its business. Things are heating up.
Image source: Getty Images.
As the chart below shows, corporate investments in AI have grown tremendously, but it shouldn't only be corporations getting pieces of the growing AI pie. If you want to invest in AI but don't know how, try the Global X Robotics and Artificial Intelligence ETF (BOTZ -0.27%).
| Year | Corporate Private Investments |
|---|---|
| 2013 | $3.18 billion |
| 2014 | $6.78 billion |
| 2015 | $10.27 billion |
| 2016 | $17.76 billion |
| 2017 | $25.53 billion |
| 2018 | $38.05 billion |
| 2019 | $45.12 billion |
| 2020 | $48.16 billion |
| 2021 | $93.54 billion |
Data source: NetBase Quid via AI Index Report (2022).
A bit of diversification
The Global X Robotics and Artificial Intelligence ETF aims to "invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence." The company contains 37 stocks but is fairly top-heavy, with the top 10 holdings accounting for roughly two-thirds of the fund.
What may surprise investors is how many of the fund's companies don't operate specifically in the information technology sector (though it's by far the most common). Here's the breakdown by industry:
- Information technology: 45.8%
- Industrials: 38.4%
- Healthcare: 13.3%
- Consumer discretionary: 1.1%
- Financials: 0.8%
- Energy: 0.6%
AI has and will continue to affect different sectors, so it helps to be invested in companies ushering the technology in to their respective industries. The ETF is also an attractive option because it includes both U.S. and international companies. Here's the mix:
- U.S.: 43%
- Japan: 35.7%
- Switzerland: 11.8%
- Norway: 3.4%
- Canada: 1.6%
- Britain: 1.5%
- Finland: 1.2%
- South Korea: 1.2%
- Israel: 0.6%
Diversification is a key part of successful long-term investing, so it's a win-win to have diversification within an ETF like this, even though it's AI-focused. The ETF has a 0.68% expense ratio ($6.80 per $1,000 invested), so it's much pricier than most index funds, but that's to be expected for a specialized fund of its type.
The growth of the AI industry
The growing mainstream popularity of AI is projected to have an enormous impact on the industry as a whole. In 2022, the global AI market was valued at about $136.6 billion. From 2023 to 2030, the industry is projected to grow at a compound annual growth rate (CAGR) of 37%, according to research from Grand View Research.
Another sign that the industry is still in the earlier stages of hypergrowth is the number of new AI-related patents in the industry. In 2017, there were 3,267 AI-related patents issued by the U.S. Patent & Trademark Office; in 2021, this number had grown to 18,753. From January to November 2022, close to 16,000 AI-related patents were issued.
Nobody can say with certainty where the AI industry will go in the future, but all signs and data point to it being one of the more significant technological shifts in quite some time.
Why you should invest in an AI ETF
The best reason to invest in an AI ETF like Global X Robotics is the exposure it gives you with just a single investment. Investing in individual companies is generally riskier than funds, and with a relatively new industry like AI, there's added risk with single companies.
ETFs can allow you to invest and bank on the broader AI industry growth.
As you become more familiar with the AI industry and the players in it, you may find that there are companies you really believe in and want to invest in specifically. Until then, a broad AI ETF is the way to go.
