There's understandably a lot of investor interest in artificial intelligence stocks right now, as large technology companies are vying for the top spot in a rapid AI race. Spending on artificial intelligence infrastructure is also sky high, with tech companies estimated to spend up to $4 trillion by 2030.
AI stocks have helped drive the broader market higher over the past few years, but knowing which company will emerge as the next big winner or loser is difficult to predict.
That's why many investors opt to put money into exchange-traded funds (ETFs), which provide broad exposure to a basket of stocks, reducing your risk while still allowing you to benefit from large AI trends.
If you have $1,000 to invest in some of the world's best AI companies, buying the Global X Artificial Intelligence and Technology ETF (AIQ 2.20%) looks like a pretty smart move. Here's why.
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You'll gain exposure to more than 80 domestic and international AI companies
One of the benefits of owning the Global X Artificial Intelligence and Technology ETF is that you'll be invested in a wide range of about 86 different AI stocks. The fund invests in a diverse range of tech companies across the tech sector, including semiconductor manufacturers, data infrastructure providers, and software makers.
This means that no matter which part of the artificial intelligence market heats up, you'll likely have some exposure to it. That could be even more important over the next few years if spending on AI infrastructure slows and AI software companies become a more significant driving force behind share price gains.
A few examples of key holdings in the fund include AI leaders such as Alphabet, Nvidia, and Taiwan Semiconductor, as well as some high-flying AI stocks, including Palantir.
The Global X Artificial Intelligence and Technology ETF holding dozens of stocks also means you'll invest in both small and large AI companies, tapping into both established players and publicly traded AI start-ups alike. The fund also invests in both domestic and international AI companies, giving you access to potentially significant AI developments abroad.
NASDAQ: AIQ
Key Data Points
This AI fund has strong historical gains
Let me say first that just because the Global X Artificial Intelligence and Technology ETF has performed well in the past, it doesn't guarantee that it will continue to do so. However, it's worth noting its past performance, as it demonstrates that, to date, the fund's stocks have generated gains higher than those of the S&P 500.
For example, the AI ETF has increased by more than 141% over the past three years, outperforming the S&P 500's gains of 82%.
That doesn't mean it can't underperform the S&P 500, of course, but it's an indicator that the combination of stocks that are in the fund is clearly benefiting from artificial intelligence.
It's also important to note that, just like any ETF, you'll have to pay an expense ratio for the fund's management. The Global X Artificial Intelligence and Technology ETF expense ratio is 0.68% -- equal to $6.80 for every $1,000 invested -- which will reduce some of your gains. That percentage is higher than the average expense ratio of ETFs, which is approximately 0.44%. Still, it may be worth the cost if the fund continues to outpace the market.
Continue to watch your investments, even with an ETF
There are a lot of AI winners out there right now, but if you want to maximize your diversification, the Global X Artificial Intelligence and Technology ETF is a great option. As with any investment, it's important to keep an eye on any new developments that could change your original investment thesis.
This means that even with a diversified ETF, you should stay up-to-date with AI developments and companies, ensuring that the fund continues to be the best option for your AI investments.
