The artificial intelligence (AI) industry continues to heat up, with OpenAI — creator of ChatGPT — squarely at the center once again. After earning $13 billion in backing from Microsoft Corp. (ticker: MSFT) since 2019, other notable tech giants are now eyeing their own investments in the AI firm.
Notably, according to the Wall Street Journal, Apple Inc. (AAPL) and Nvidia Corp. (NVDA) are in talks to join the latest fundraising round led by Thrive Capital, which insiders suggest could push OpenAI’s valuation above $100 billion.
All three of these firms have been very active with their AI ambitions: Nvidia has been steadily rolling out its H100 Tensor Core GPU, designed for high-performance AI applications such as deep learning and generative AI, while Apple has been teasing “Apple Intelligence,” a proprietary assistant that would compete with Microsoft’s recent launch of Copilot.
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While average retail investors can’t participate in OpenAI’s latest funding round alongside these tech giants, they can still gain exposure to the overall AI industry via a thematic exchange-traded fund (ETF). These AI-focused ETFs offer a diversified and accessible way to invest in the rapidly evolving AI sector.
“We’re in the early stages of the AI cycle, and proper diversification is extremely important — be it across company stages or geographies — because it’s difficult to pick a winner or two this early,” says Tejas Dessai, assistant vice president and research analyst at Global X ETFs. “With a thematic ETF, you’re following an idea as opposed to a complex strategy.”
Here are six of the best AI ETFs to buy now:
| ETF | Expense ratio |
| Roundhill Generative AI & Technology ETF (CHAT) | 0.75% |
| Invesco AI and Next Gen Software ETF (IGPT) | 0.60% |
| Global X Artificial Intelligence & Technology ETF (AIQ) | 0.68% |
| Global X Robotics & Artificial Intelligence ETF (BOTZ) | 0.68% |
| First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT) | 0.65% |
| REX AI Equity Premium Income ETF (AIPI) | 0.65% |
Roundhill Generative AI & Technology ETF (CHAT)
“Generative AI is the most exciting technological advancement in years, with the ability to transform how we live and work,” says Dave Mazza, CEO at Roundhill Investments. While some AI ETFs may focus more on companies applying AI to industrial roles like automation, others like the actively managed CHAT explicitly focus on just the large tech companies pioneering and developing generative AI applications.
“The ETF selects stocks using a proprietary methodology that combines a transcript score and sector score to evaluate companies’ relevance to generative AI, factoring in their revenue, profit and R&D investment in AI technologies,” Mazza explains. “Companies are then scored and selected based on their exposure to AI, market capitalization and liquidity.” CHAT charges a 0.75% expense ratio.
Invesco AI and Next Gen Software ETF (IGPT)
“We believe the AI trend will broaden in scope to encompass additional segments of the market, with new technological advancements, a more stable interest rate environment and the ongoing impact of fiscal stimulus broadening innovation across multiple industries,” says Rene Reyna, head of thematic and specialty product strategy at Invesco. For AI, Invesco offers IGPT at a 0.6% expense ratio.
IGPT tracks the STOXX World AC NexGen Software Development Index. “The index targets 100 companies from across the globe that generate revenue from various forms of software and AI, such as data storage, robotics, autonomous vehicles, semiconductors and web platforms,” Reyna says. Top holdings include Meta Platforms Inc. (META), Alphabet Inc. (GOOGL) and Nvidia.
Global X Artificial Intelligence & Technology ETF (AIQ)
With about $2.1 billion in assets under management, AIQ is one of the more popular AI ETFs currently available. Its benchmark, the Indxx Artificial Intelligence & Big Data Index features a fairly concentrated portfolio of 84 global holdings tilted toward growth stocks, mostly from the technology sector. It charges a 0.68% expense ratio and pays a low, tax-efficient 0.2% 30-day SEC yield.
“AIQ offers a broad and comprehensive exposure to the entire AI value chain, with exposure that ends up looking quite like the Nasdaq-100 but is more tilted toward technology and mid-cap growth,” Dessai says. The top holdings in this ETF currently include ServiceNow Inc. (NOW), Alibaba Group Holding Ltd. (BABA), Netflix Inc. (NFLX), Cisco Systems Inc. (CSCO), Meta Platforms and Adobe Inc. (ADBE).
Global X Robotics & Artificial Intelligence ETF (BOTZ)
Investors can invest in the semiconductor and software companies creating the infrastructure for AI projects with AIQ, but what if you wanted to invest in companies applying AI to solve problems and improve efficiency? The Global X thematic ETF to consider here is BOTZ, which tracks the Global Robotics & Artificial Intelligence Thematic Index for the same 0.68% expense ratio as AIQ.
“We see BOTZ as a more niche play on applied automation,” Dessai says. Compared to AIQ, BOTZ has a significantly higher proportion of international stocks, mostly from Japan. It also holds more companies from the industrial and health care sector that are deploying AI and robotics to enhance their offerings. One example is Intuitive Surgical Inc. (ISRG), with its DaVinci surgical robot.
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT)
For a stringent approach to AI investing, consider ROBT. This ETF tracks the Nasdaq CTA Artificial Intelligence and Robotics Index, which classifies holdings as either AI “enablers, engagers or enhancers.” Engagers develop and design AI and robotics, enablers manufacture the basic components, and enhancers provide value-added, tertiary services. Each holding is then scored per these three categories.
Within each of the three categories, the top 30 companies are selected and equally weighted. Each category is also assigned a different weight — engagers receive 60%, while enablers and enhancers receive 25% and 15%, respectively. Every quarter, ROBT is rebalanced, with reconstitution occurring semi-annually. The ETF charges a 0.65% expense ratio.
REX AI Equity Premium Income ETF (AIPI)
The previous AI ETFs all pay out low dividend yields, which is beneficial for tax efficiency. However, this means income investors may overlook them. If higher yield is a priority in an AI investment, consider a covered call ETF like AIPI. Right now, this ETF is paying a distribution yield of 34.8%, which is calculated by its most recent monthly payment annualized, and then divided by its net asset value.
“AIPI’s covered call strategy generates a considerable amount of income by selling call options on each of the individual holdings,” says Scott Acheychek, chief operating officer at REX Financial. “This provides a rare income source in a sector not typically associated with dividends.” However, investors should note that the income from AIPI can fluctuate, and selling covered calls can cap upside price appreciation.
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6 of the Best AI ETFs to Buy Now originally appeared on usnews.com
Update 09/05/24: This story was previously published at an earlier date and has been updated with new information.
