2 Magnificent Ark Invest ETFs to Buy for the Artificial Intelligence (AI) Boom

Ark Investment Management operates 14 exchange-traded funds (ETFs) focused on disruptive innovation. Other than its broad-based flagship ETF,  each invests in different areas of the technology sector with strong long-term growth potential, including electric vehicles, robotics, cryptocurrencies, and artificial intelligence (AI).

Ark Invest is run by Cathie Wood, who is one of the most bullish voices on Wall Street when it comes to the potential of the technology sector. Under her leadership, Ark Invest issued a forecast that suggests AI could add a whopping $200 trillion to the global economy by 2030.

The Ark Innovation ETF (ARKK 2.40%) and the Ark Autonomous Technology and Robotics ETF (ARKQ 2.57%) hold a number of different stocks that reflect that forecast, and investing in either fund or both might be a great long-term decision.

1. Ark Innovation ETF (ARKK)

This is Ark's flagship ETF, and it manages more than $8.2 billion on behalf of its investors. While it owns a number of AI stocks, it also invests in companies in the biotechnology, automation, clean energy, and financial technology industries, among others.

The Ark Innovation ETF currently holds 38 stocks across those segments. The fund is actively managed, so Wood and her team of experts adjust the portfolio as necessary, which is convenient for passive investors.

The ETF is heavily weighted toward its top five holdings, which account for 39.5% of the total value of its portfolio:

Data source: Ark Invest. Portfolio weightings are as of April 9, 2024.

Tesla falls into a few different buckets. It's one of the world's largest electric vehicle companies by sales, but Wood also calls it the biggest AI opportunity because of the full self-driving software it is developing. Plus, Tesla is developing robotics on several fronts, from its manufacturing processes to its Optimus humanoid robot.

Coinbase is one of the world's largest cryptocurrency exchanges, and its stock has soared 267% over the past year on the back of a strong recovery in leading coins like Bitcoin. UiPath, on the other hand, develops robotic automation software, and it's another stock Wood has highlighted as a favorite in the AI space.

The Ark Innovation ETF holds a number of other popular AI stocks outside of its top five, including Palantir Technologies and Meta Platforms.

While ETFs tend to carry less risk than individual stocks, they are not risk free. The Ark Innovation ETF is still trading down by 69% from the all-time high it touched in early 2021, which was followed by a tech crash in 2022. Indeed, it's below where it was at the start of 2020. However, it has still delivered a compound annual return of 11.7% since its inception in 2014, which is roughly in line with the 11.8% annualized gains of the S&P 500 index over the same period.

The Ark Innovation ETF's heavy concentration in high-growth tech stocks means it has the potential to outperform the broader market over the long term, but investors who buy it should be prepared for volatility along the way.

2. Ark Autonomous Technology and Robotics ETF (ARKQ)

The Ark Autonomous Technology and Robotics ETF is much smaller than the flagship fund, with just $914 million in assets under management. It holds 36 different stocks with a focus on autonomous transportation, 3D printing, green energy, space exploration, and robotics and automation. Many of those emerging industries rely on AI in some capacity, so the fund is an effective way to invest in the technology.

This fund, too, is quite concentrated, which means a handful of stocks can have a disproportionate effect on its performance. Its top five holdings account for 42.9% of the value of its portfolio:

Data source: Ark Invest. Portfolio weightings are as of April 9, 2024.

Tesla stock is the top holding in the Ark Autonomous Technology and Robotics ETF, mainly because of its full self-driving software. Stocks like Kratos Defense and Security and Teradyne, on the other hand, might be somewhat unfamiliar to most investors.

Kratos makes several hardware and software products for commercial and military applications, from unmanned aerial and ground vehicles to space communications and launch systems. Teradyne develops automation equipment for industrial applications, which helps manufacturers of electronics like semiconductors and wireless solutions test their products' quality.

Outside of the Ark Autonomous Technology and Robotics ETF's top five holdings, investors will find a number of popular AI stocks like Nvidia, Alphabet, and Advanced Micro Devices.

The ETF has suffered a 46% decline from its all-time high in early 2021 for similar reasons to the Ark Innovation fund, but it has delivered a compound annual return of 12% since its inception in 2014, so it has still outperformed the S&P 500 over the long term.

Again, it's important for investors to be ready to ride out periods of volatility when buying an ETF that is so concentrated in niche segments of the technology sector, recognizing that despite those oscillations, it can produce solid rewards in the long run.