Unlike some past tech trends that investors believed to be the next big thing (I'm looking at you, 3D printing), artificial intelligence (AI) is living up to the hype, and its presence is increasingly found across various businesses and areas of our lives.
But identifying a single AI stock can feel overwhelming for investors unfamiliar with the industry. Fortunately for them, choosing an exchange-traded fund (ETF) is an excellent way to gain AI exposure while reducing the risk of investing in a single stock, and starting positions in these AI ETFs seems like a bright idea right now: the Ark Autonomous Technology & Robotics ETF (ARKQ +0.52%), the iShares Robotics and Artificial Intelligence Multisector ETF (IRBO 0.64%), and the Roundhill Generative AI & Technology ETF (CHAT 1.51%).
1. Ark Autonomous Technology & Robotics ETF
With Cathie Wood at the helm, the Ark Autonomous Technology & Robotics ETF includes exposure to a wide variety of AI-related stocks. Autonomous mobility stocks are the main concentration of the ETF's holdings, representing approximately 45% of the fund's composition. One of the most recognizable names in self-driving, Tesla, is the ETF's largest holding, representing a weighting of 12.6%. Similarly, Trimble, the fourth-largest position in the Ark Autonomous Technology & Robotics ETF, provides navigation solutions to help facilitate autonomous mobility.
NYSEMKT: ARKQ
Key Data Points
With regards to AI software, UiPath is the second-largest holding in the ETF. Helping businesses to automate their workflows, UiPath is one of Wood's favorite AI stocks, and it's a major holding in several Ark Invest funds, including the Ark Innovation ETF and the Ark Next Generation Internet ETF.
The Ark Autonomous Technology & Robotics ETF currently has about $1 billion in assets under management, and it has an expense ratio of 0.75%, or $75 annually per $10,000 invested.
2. iShares Robotics and Artificial Intelligence Multisector ETF
According to BlackRock, the fund's manager, the goal of the iShares Robotics and Artificial Intelligence Multisector ETF is to match the performance "of an index composed of developed and emerging market companies that could benefit from the long-term growth and innovation in robotics technologies and artificial intelligence."
A more comprehensive option than the Ark Autonomous Technology & Robotics ETF, which currently includes 35 stocks, is the iShares Robotics and Artificial Intelligence Multisector ETF, which has 111 holdings. Its fairly equal weighting among its holdings will also make it alluring to investors who don't want to assume too much risk. The top three holdings in the ETF, for example, are Stratasys, Silicon Laboratories, and Ansys -- all three of which have approximately 1.1% weightings.
NYSEMKT: IRBO
Key Data Points
Another benefit of the iShares Robotics and Artificial Intelligence Multisector ETF is that it makes semi-annual distributions. Currently, the distributions amount to a 12-month trailing yield of 0.64%, which may not be much to write home about, but it could help to cover the cost of the 0.47% expense ratio.
3. Roundhill Generative AI & Technology ETF
For a decidedly more concentrated approach to AI stocks, the Roundhill Generative AI & Technology ETF is a great choice. The stated goal of the ETF is to "provide exposure to companies involved in the investment theme of artificial intelligence (AI), generative artificial intelligence, and related technologies," and it includes the most familiar players in the AI world. The largest position in the ETF is Microsoft, which is a partner of OpenAI, the developer of ChatGPT. Nvidia and Alphabet, two premier AI names in their own rights, round out the top three holdings.
NYSEMKT: CHAT
Key Data Points
The Roundhill Generative AI & Technology ETF is a newer kid on the AI ETF block, launching in May 2023. Since its debut on the public markets, it provided market-beating returns, rising about 18.7% while the S&P 500 rose 13.9%. Like the Ark Autonomous Technology & Robotics ETF, the Roundhill Generative AI & Technology ETF also has a 0.75% expense ratio.
Which AI ETF is a bright idea for you?
For fans of Wood, the Ark Autonomous Technology & Robotics ETF is a no-brainer, though investors who are committed to gaining exposure to robotics-related stocks will also be drawn to the ETF. Those who are interested in a more conservative approach, however, will find the iShares Robotics and Artificial Intelligence Multisector ETF more compelling, thanks to its diverse holdings, lower expense ratio, and semi-annual distribution. And for investors who are particularly interested in generative AI exposure, the Roundhill Generative AI & Technology ETF will be more attractive.
