Investing in the future of AI can be an excellent decision as the technology continues to grow and develop rapidly. If you are looking to invest in the AI sector without the hassle of choosing individual stocks, there are a few options available to you.
No pure AI focus ETF yet?
As there is no pure AI focus ETF yet based on my search. One option to consider is investing in an ETF that focuses on AI and robotics. An ETF, or exchange-traded fund, is a type of investment fund that trades on stock exchanges like individual stocks. ETFs can be an excellent option for investors who are looking for diversification across a range of companies in a particular sector, such as AI.
Global X Robotics & Artificial Intelligence ETF (BOTZ).
One ETF to consider is the $Global X Robotics & Artificial Intelligence Thematic ETF(BOTZ)$ Global X Robotics & Artificial Intelligence ETF (BOTZ). This ETF invests in companies that are involved in the development and production of robotics and AI technologies. The BOTZ ETF has an expense ratio of 0.68% and includes holdings in companies like Fanuc, Intuitive Surgical, and Mitsubishi Electric.
Mutual Fund
Aside from ETFs, there are also mutual funds that focus on the AI industry. One such mutual fund is the Matthews Asia Innovators Fund (MATFX), which focuses on investing in innovative companies in Asia, including those involved in AI and robotics. The fund has an expense ratio of 1.10% and has performed well in recent years, with a 5-year annualized return of 23.84%.
Individual Stocks
Investors may also consider investing in individual companies that are leaders in the AI industry. While this requires more research and knowledge about the companies and their prospects, it can lead to potentially higher returns. Other than $Microsoft(MSFT)$
Invest in AI powered ETFs to ride on the AI wave?
AI-powered ETF (Exchange-Traded Fund) uses artificial intelligence and machine learning algorithms to construct and manage its portfolio. One of the more famous one is AIEQ who uses a rules-based approach to selecting and weighting securities in its portfolio. The algorithm analyzes vast amounts of data, including financial statements, news articles, and social media activity, to identify companies that are expected to perform well in the market. The algorithm also considers factors such as earnings growth, valuation, and momentum. The portfolio of AIEQ typically includes 30 to 70 companies from a range of sectors, with a focus on mid-cap companies. The ETF is re-balanced quarterly to adjust for changes in market conditions and to optimize the portfolio composition. One potential advantage of AIEQ is its ability to adapt to changing market conditions and to identify investment opportunities that may be overlooked by human analysts.
Outlook
It is also important to consider the potential risks associated with investing in AI. As with any investment, there is always the risk of losing money. Additionally, the AI industry is still relatively new and developing, so it can be challenging to predict which companies will succeed in the long run. However, with the rapid growth and potential for AI to revolutionize many industries, investing in AI can be a promising long-term strategy for investors.
ETF comparisons
Comparing QQQ$Invesco QQQ Trust(QQQ)$
For example, QQQ share price follows is based on a modified capitalization methodology. This modified method uses individual weights of included items according to their market capitalization. As such it rises more when big names such as MSFT, NVDA and AMD rallied.
On the other hand, ROBO holds 83 different stocks, with no single one accounting for more than 1.9% of the ETF's value.
While the AIEQ ETF is underperforming probably because it's focus is on mid-cap companies.
Personally, I think Growth for AI, especially AI language model will be dominated by large names such as MSFT and Google. Therefore, it may be better to invest in QQQ compared to individual focus ETF.
Conclusion
Overall, if you are interested in investing in the future of AI but do not want to choose individual stocks, ETFs such QQQ or Tech focused ETF such as $iShares U.S. Technology ETF(IYW)$ IYW maybe the better option for diversifying your portfolio and gaining exposure to the AI industry.
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