Artificial intelligence (AI) is a huge theme for investors right now, and for good reason. The AI space is growing quickly, expected to jump from $279.2 billion in 2024 to $3.5 trillion just eight years from now -- a compound annual growth rate of 31.5%. While investors can spend a lot of time and effort looking for the best basket of AI stocks to buy, it makes a lot of sense to buy a basket of them at the same time through an AI exchange-traded fund.
AI ETFs are great ways to invest because they provide solid returns and diversification at the same time. And because ETFs are so popular, you have a lot of different ways that you can invest.
I've chosen three types of AI ETFs that provide exposure to AI stocks -- each with a different theme. Decide which appeals most to you we prepare for massive AI gains in the next eight years.
Image source: Getty Images.
AI-themed ETFs
When you think about AI ETFs, this category is probably first on your mind -- funds that have a specific focus on companies that are directly involved in developing or using AI. My choice here is the ROBO Global Artificial Intelligence ETF (THNQ 0.50%).
Operated by ROBO Global ETFs, this fund tracks the performance of the ROBO Global Artificial Intelligence index and includes companies in computing, data, and cloud services, as well as industries such as e-commerce and healthcare that utilize AI.
NYSEMKT: THNQ
Key Data Points
The THNQ ETF currently holds 52 stocks, with its top holdings being Nebius Group, Advanced Micro Devices, and Alibaba Group. No company has greater than a 3.3% weighing, making the ROBO Global Artificial Intelligence ETF a very balanced fund.
The ETF has an expense ratio of 0.75%, or $75 annually for each $10,000 invested. And the fund is soundly beating the greater market, up 44% in the last year.
Broad tech ETFs
Now we're shifting gears a little to a more widely focused fund. The Vanguard Information Technology ETF (VGT 0.69%) is a general tech stock fund that has a lot of AI exposure. This is a fund ideal for investors who are interested in artificial intelligence but want a hedge in case AI stocks are in a bubble, as some bears speculate.
NYSEMKT: VGT
Key Data Points
The VGT ETF is operated by Vanguard Group and tracks the MSCI US Investable Market Information Technology 25/50 index. It currently holds 314 stocks, with a 31% weighting in semiconductor stocks, followed by systems software (19.8%), technology hardware and storage (16%), and application software (15.1%).
Top holdings are the big dogs in the tech space, led by Nvidia, Apple, and Microsoft, which have a collective 43.6% weighting in the fund. And if you're looking for bargain-basement management fees, you'll be interested to see the VGT ETF has a low expense ratio of 0.09%. The fund is up 29% in the last year.
AI-run ETFs
Now things get interesting. How about letting AI pick the stocks for you? That's what you're getting in the AI Powered Equity ETF (AIEQ 0.89%). This fund, operated by Amplify ETFs, uses IBM Watson to pick and choose funds to go in the ETF. The fund uses data points collected from news, social media, analysts, industry reports, and financial statements.
The fund currently has 38.5% of its stock in information technology companies, followed by communication services (12.36%) and consumer discretionary stocks (9.25%). With 160 stocks, the fund's top holdings are also Nvidia, Microsoft, and Apple, although they only have a collective weighting of 32.7%. Other major names include Amazon, Avery Dennison, and Meta Platforms.
NYSEMKT: AIEQ
Key Data Points
The AIEQ fund has an expense ratio of 0.75%, and the fund's performance is the worst of the three examined here, with a one-year gain of 20.6%.
Shopping for AI ETFs
AI ETFs are easy ways for investors to tap into the dramatic gains in AI without having to worry about choosing specific winners. Whether you are looking at an AI-themed ETF, a broader tech ETF with a lot of AI exposure, or letting AI pick the funds for you, these funds are compelling vehicles to follow these emerging trends while managing risk in a sector that is rapidly evolving.
