Are these the best AI ETFs to watch in Q4 2024?
These five AI ETFs are top picks to watch in the coming months, chosen for their significant market valuations.
Artificial Intelligence (AI) was the investing theme of 2023 – despite elevated interest rates, the big US tech stocks rose sharply in the year – with the ‘magnificent seven’ driving most of the gains within the S&P 500 and the NASDAQ. What's more, heightened interest in the theme has continued into 2024.
The poster child for the AI revolution arguably remains Nvidia, which now sports a gigantic $2.3 trillion valuation. In recent Q4 2024 results, the company saw revenue rise by 265% year-over-year and 22% quarter-on-quarter to a record $22.1 billion, driven by Data Centre revenue, which increased by 409% in the year to $18.4 billion.
CEO and founder Jensen Huang enthuses that ‘accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations.’
Arguably, the AI explosion was lit by the launch of OpenAI’s chatbot, ChatGPT, but artificial intelligence has long been used across sectors including entertainment, social media, art, retail, security, sports analytics, manufacturing, self-driving cars, healthcare, and warehousing alongside dozens of other sectors.
For perspective, ChatGPT garnered over 1 million users in just five days and now boasts over 150 million weekly active users. By contrast, it took Netflix three and a half years to hit the same milestone.
But for every OpenAI, dozens of companies will get nowhere close to profitability. This is the reality of entrepreneurialism in a growing space and can make investing in AI through diversified ETFs a more attractive choice for risk-averse investors looking to gain exposure to the theme.
Meanwhile, governments are deciding how to regulate the new technology, with the Council of Europe adopting its first binding international treaty on the use of AI systems, with 46 signature countries.
Best AI ETFs to watch
These ETFs are some of the most well-known AI funds on the market. Past performance is not a guide to future returns.
Global X Robotics & Artificial Intelligence ETF
The Global X Robotics & Artificial Intelligence ETF (BOTZ) is a dynamic investment option designed to capture the growth of the robotics and AI sectors. Launched in September 2016, BOTZ tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index, providing exposure to companies leading in technological innovation. With top holdings like NVIDIA, Intuitive Surgical, and ABB, the ETF taps into the expanding global robotics market, which is projected to grow from $80 billion in 2022 to $280 billion by 2032.
BOTZ stands out due to its compelling economics and high growth potential. The cost of industrial robots has significantly decreased, making robotics and automation more accessible and profitable. This trend, combined with advancements in AI, is driving widespread adoption across various sectors. Investors are particularly drawn to BOTZ’s diversified approach, which spans multiple industries, including technology, healthcare, and industrials, mitigating risk and enhancing growth opportunities.
Global X Robotics & Artificial Intelligence ETF offers a unique blend of high growth potential, compelling economics, and diversified exposure. For investors looking to capitalise on the transformative power of robotics and AI, BOTZ presents a promising opportunity to be part of the future of technology.
The ROBO Global Robotics and Automation Index ETF
The ROBO Global Robotics and Automation Index ETF (ROBO), launched in 2013, offers investors a gateway to the rapidly advancing fields of robotics and automation. This ETF tracks the ROBO Global Robotics and Automation Index, encompassing companies that are at the forefront of developing and implementing robotics and automation technologies. It aims to harness the growth potential across a variety of sectors, including manufacturing, healthcare, logistics, and consumer products.
A major draw of ROBO is its extensive diversification. The fund includes a mix of well-established companies like Intuitive Surgical, Rockwell Automation, and ServiceNow, alongside innovative smaller firms. This broad investment strategy helps to spread risk while providing exposure to the latest technological advancements. By focusing on both large-cap leaders and emerging innovators, ROBO ensures a balanced approach to capturing growth opportunities in this dynamic market. Investors are particularly attracted to ROBO for its potential to benefit from significant market expansion, making it an appealing choice for those looking to invest in the future of technology.
iShares Robotics and Artificial Intelligence ETF
The iShares Robotics and Artificial Intelligence ETF (IRBO) is an innovative fund that offers investors access to the rapidly growing fields of robotics and AI. Since its inception in June 2018, IRBO has aimed to replicate the performance of the Morningstar Global Robotics & Artificial Intelligence Index. This index comprises a diverse array of global companies that are pioneering advancements in AI and robotics, spanning multiple sectors such as technology, healthcare, and industrials. The ETF is structured to harness the growth potential of these transformative technologies, making it a compelling choice for investors looking to capitalise on future trends.
A distinctive feature of IRBO is its equal-weighted methodology, which ensures a balanced representation of its holdings. This approach prevents any single company from disproportionately influencing the fund’s performance, thereby spreading risk more evenly. The ETF includes a mix of industry leaders and emerging innovators, with top holdings like NVIDIA, Advanced Micro Devices (AMD), and Palantir Technologies. This strategic diversification not only mitigates risk but also positions the fund to benefit from significant technological advancements and market growth. For investors seeking a well-rounded exposure to the AI and robotics sectors, IRBO presents a robust and forward-looking investment opportunity.
First Trust Nasdaq Artificial Intelligence ETF
The First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT) is a distinctive investment fund that targets the dynamic sectors of AI and robotics. Launched in February 2018, ROBT seeks to track the Nasdaq CTA Artificial Intelligence and Robotics Index, which includes companies developing and applying AI and robotics across various industries. This ETF is designed to capture the growth potential of these cutting-edge technologies, making it an attractive option for forward-thinking investors.
What sets ROBT apart is its strategic diversification. The fund invests in various companies, from established tech giants like ServiceNow and Palantir Technologies to innovative firms like Upstart Holdings. This diverse mix helps to balance risk while providing exposure to the latest advancements in AI and robotics. The ETF’s focus on large and mid-cap companies ensures a comprehensive approach to capturing growth opportunities in this rapidly evolving sector.
L&G Artificial Intelligence UCITS ETF
The L&G Artificial Intelligence UCITS ETF (AIAG), launched in June 2019, is designed to give investors access to the rapidly evolving AI sector. This ETF tracks the ROBO Global Artificial Intelligence Index, which includes a diverse range of companies leading in AI development and application. By focusing on the growth potential of AI technologies, AIAG offers a unique opportunity for investors to engage with the AI revolution across various industries.
A key feature of AIAG is its broad diversification. The fund includes a mix of established tech giants and innovative newcomers, with top holdings such as Samsara Inc., ServiceNow, and Autodesk. This strategic mix helps to balance risk while providing exposure to cutting-edge advancements in AI. The ETF’s emphasis on both large and mid-cap companies ensures a comprehensive approach to capturing growth opportunities in this dynamic sector. As the global AI market continues to expand, driven by increasing automation and technological advancements, AIAG stands out as a compelling choice for investors looking to capitalise on these long-term trends.
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Top AI ETFs to watch summed up
These are just a selection of some of the top AI ETFs available. Always do your own research. Past performance is not a guide to future returns.
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