Megaphone icon ETF Database is now VettaFi. Read More >
ETFdb Logo
ETFdb Logo
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • Entrepreneur ETF
    • Equity ETF
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Future ETFs
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Modern Alpha
    • Multi-Asset
    • Multi-Factor
    • Nasdaq Investment Intelligence
    • Portfolio Strategies
    • Retirement Income
    • Smart Beta
    • Thematic Investing
    • Volatility Resource
  • Database
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
    • ETFs Future-Forward 2021: An iShares Investing Symposium
    • Three Themes for 2021: An iShares & MSCI Investing Symposium
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Videos & Podcasts
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Technology ETFs
  2. The Best ETFs to Capitalize on the Rise of Artificial Intelligence
Technology ETFs
Share

The Best ETFs to Capitalize on the Rise of Artificial Intelligence

Justin KuepperOct 13, 2016
2016-10-13

Artificial intelligence – or AI – may sound like a sci-fi concept that remains a distant possibility, but the odds are that you’ve already interacted with some form of AI. For example, Facebook Inc. (FB) uses AI to recognize faces in images that users post, Alphabet Inc. (GOOGL) uses AI to predict what you’re searching for before you’re even done typing and Amazon Inc. (AMZN) uses AI to predict what products you’ll buy.

In this article, we’ll take a look at the best exchange-traded funds (ETFs) for investors to consider in the artificial intelligence space.

Growth in AI

Artificial intelligence is widely seen as a technology that will replace human work. While robots have taken a lot of manufacturing jobs, artificial intelligence has thus far only complemented knowledge workers by making their jobs easier. Mustafa Suleyman, co-founder of Alphabet’s DeepMind, believes that AI is still decades away from replacing knowledge workers on a large scale, although it’s something people should “pay attention to.”

According to ReportsnReports, the artificial intelligence market is expected to grow at a 53.65% compound annual growth rate from $419.7 million in 2014 to $5.05 billion by 2020. Machine learning technology is expected to account for the largest share of the growth as it’s used to improve media and advertising, as well as the financials sector. Furthermore, artificial intelligence as a replacement for human intelligence could emerge over the next five years.

Over the longer term, these technologies could be used to solve complex financial problems and develop healthcare solutions pertaining to clinical trials and related studies. A great example would be assimilating the data from millions of clinical trials in order to find similarities that investigators could then target for the treatment of certain diseases. These kinds of drug discovery applications could generate billions in revenue for biotech firms leveraging AI.


Content continues below advertisement

Investing in AI

There are many different companies that are actively focused on research and development activities in the artificial intelligence industry. While oftentimes these companies are focused on a particular segment of the AI market, such as healthcare or e-commerce, there are also several companies that are researching AI in a purer sense, including IBM and Alphabet.

According to Reportsnreports, some of the top publicly traded companies in the global AI market include:

  • IBM Corp. (IBM)
  • Microsoft Corp. (MSFT)
  • Google Inc. (GOOGL)
  • Rocket Fuel Inc.
  • Mobileye NV (MBLY)

Most investors might be better off investing in ETFs since they provide instant diversification across the entire industry. Global X recently launched its Robotics & Artificial Intelligence Thematic ETF (BOTZ) that provides exposure targeting the industry with an expense ratio of 0.68%. The ETF’s top holdings include SMC Corp. (SMECF) and ABB Ltd. (ABB) at around 8% of the portfolio a piece.

The Robo Global Robotics & Automation Index ETF (ROBO ) is another option for investors to consider with a 0.95% expense ratio. Some of the fund’s largest holdings include iRobot Corp. (IRBT) and Cognex Corp. (CGNX), although no single stock accounts for more than 2.5% of the portfolio. This makes it a more diversified option than the Global X ETF that’s focused on artificial intelligence.

ETFdb’s Stock Exposure Tool can help investors find additional ETFs that have significant holdings in companies focused on AI research and development. In addition, investors can check their existing holdings to see how much exposure they already have to these companies.

For a full list of Artificial Intelligence ETFs, click here.

Risks to Consider

Investors should keep in mind that there are several important risk factors to consider when investing in emerging technologies like artificial intelligence.

Some of these key risk factors include:

  • Expense Ratios. Many specialized ETFs have higher expense ratios than broad market index ETFs, which means that investors should factor in these costs.
  • Indirect Exposure. Many companies involved in AI R&D are also focused on other industries, which could increase their risk in these areas. For example, Alphabet Inc. has an AI research division, but its stock trades based on its ad division’s performance.
  • Long-term Play. Artificial intelligence remains in its infancy, although it’s seeing strong double-digit growth rates. Investors should be aware that the industry could take decades to fully mature and deliver exceptional value.

The Bottom Line

The artificial intelligence industry is already worth more than $400 million per year and is expected to grow at a 50%+ clip to more than $5 billion by 2020. Investors looking to capitalize on these opportunities may want to consider the Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ) as a pure-play or other ETFs that have overweight holdings of companies involved in R&D focused on machine learning and AI.

» Popular Pages

  • Tickers
  • Articles

May 25

The Thread Grows Larger as Needle Shrinks

May 25

Yahoo Finance: Dave Nadig Talks Alternative Allocations

May 25

ETF Leaders Powered by the NYSE: Gunjan Chauhan

May 25

Gold Could Reach $5,000 by 2030

May 25

SEC Considers Stricter ESG Disclosure Requirements

May 25

Best & Worst Monthly Performers: May 25 Edition

May 25

Canterbury: May Market Video

May 25

Ethereum's Long-Term Allure Is Evident

May 25

Insurers Own More ETFs Than You Think

May 25

Focus on FMET for Metaverse Equity Bargains

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

ARKK

ARK Innovation ETF

XLE

Energy Select Sector SPDR...

DBA

Invesco DB Agriculture Fund

VTI

Vanguard Total Stock Market...

VGT

Vanguard Information...

WEAT

Teucrium Wheat Fund

SCHD

Schwab US Dividend Equity ETF...

Loading Articles...
Help & Info
  • Contact Us
  • Mission Statement
  • Press
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © ETF Flows LLC
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

Equity ETF Channel

Retirement Portfolio Redux: Is the 60%-40% Portfolio Dead?

Debbie CarlsonOct 22, 2020
2020-10-22

With the 10-year U.S. Treasury yield hovering below 1% and Federal Reserve Chairman Jerome Powell...

Equity ETF Channel

Portfolio Diversification Isn't Dead, It Was Just Sleeping

Debbie CarlsonOct 15, 2020
2020-10-15

Investors could be forgiven to think there was no reason to invest outside of the U.S. for the...

}
X