Artificial intelligence (AI) is, without a doubt, one of the most exciting technology trends right now. The global AI market is about $150 billion in size in 2023 but is expected to reach more than $1.3 trillion by 2030. It's fair to say that this will create some incredible investment opportunities along the way.
However, it can be difficult to figure out which companies stand to benefit the most from AI. Plus, many of the stocks in this group can be extremely volatile. If you're looking to invest in AI but don't feel comfortable choosing individual stocks, then an exchange-traded fund (ETF), like the Ark Innovation ETF (ARKK 2.50%), could be the way to go.
NYSEMKT: ARKK
Key Data Points
A collection of top AI businesses
Cathie Wood's Ark Innovation ETF isn't specifically focused on artificial intelligence stocks, but that's certainly where a lot of the innovation in the world is taking place right now. While you won't get a portfolio of AI-specific companies like chipmakers, software giants, and other such direct plays on the development of AI technology, you will get a collection of businesses that could greatly benefit as the technology evolves.
With that in mind, a quick look at the fund's top holdings shows that there are big implications for AI. Here are the 10 largest holdings of the Ark Innovation ETF, as of Dec. 11:
|
Company (Ticker Symbol) |
Percentage of Portfolio |
|---|---|
|
Coinbase |
11.1% |
|
Roku (ROKU 0.54%) |
8.4% |
|
UiPath |
7.8% |
|
Tesla |
7.5% |
|
Zoom Video Communications (ZM +0.91%) |
7.1% |
|
Block |
6.2% |
|
CRISPR Therapeutics |
4.3% |
|
Roblox |
4.1% |
|
Twilio |
4% |
|
Unity Software |
3.3% |
Data source: Ark Funds. Fund weightings rounded to the nearest 0.1%.
Just to name an example, Roku, which is the ETF's second-largest investment, uses AI to make sure advertisements reach their target audiences on the Roku Channel and give personalized content recommendations based on users' previous viewing behavior. Zoom, another top-five holding of the Ark Innovation ETF, has developed several productivity tools using AI, such as Zoom Revenue Accelerator, Zoom Virtual Agent, and the Zoom AI Companion digital assistant.
I could go on, and the reality is that virtually all of the companies that make up the Ark Innovation ETF already use or are developing ways to incorporate AI technology into their businesses.
Important details to know about the Ark Innovation ETF
According to its prospectus, the Ark Innovation ETF typically holds between 35 and 55 different stocks. As of this writing, it has a total of 34. However, as you can see from the list of its top 10 holdings (which make up a combined 64% of the portfolio), it's rather concentrated in its largest positions.
The fund has a total of $5.8 billion in assets, as of Dec. 11, and can be purchased just like any stock on a per-share basis through your broker.
Finally, it's important to mention the fees involved. All exchange-traded funds charge fees, which are known as the expense ratio and are expressed as a percentage of the fund's assets. The Ark Innovation ETF charges a 0.75% expense ratio, which implies that for every $1,000 you have in the fund, you'll pay $7.50 in investment fees. To be clear, this isn't a fee you actually have to pay -- it will be reflected in the fund's performance.
A 0.75% expense ratio is a bit on the high end for an ETF, but keep in mind that most ETFs are passively managed index funds. The Ark Innovation ETF is an actively managed fund and highly specialized, and this expense ratio is on par with similar actively managed funds.
The bottom line is that if you're looking for a way to invest in the AI revolution but aren't comfortable with picking individual stocks, the Ark Innovation ETF could be a great way to get exposure to some of the companies that could benefit tremendously as the technology grows.
