Most of the “Magnificent Seven” stocks have involvement in artificial intelligence (AI) ventures, but arguably the two most deeply invested — and poised to face off in the coming years — are Microsoft Corp. (ticker: MSFT) and Amazon.com Inc. (AMZN).
These tech giants are currently engaged in a proxy battle for dominance in the AI industry through their investments in competing, privately held startups.
For Microsoft, this comes in the form of a nearly $14 billion stake in OpenAI. This company is behind cutting-edge technologies like ChatGPT (a conversational AI), DALL-E (AI for generating images from text prompts) and Sora (AI for creating videos from text descriptions).
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In response, Amazon has thrown its weight behind Anthropic, a rival firm founded by former OpenAI executives. In late November, Amazon announced an additional $4 billion investment in Anthropic, bringing its total commitment to $8 billion.
Amazon will also serve as Anthropic’s primary cloud and training partner, leveraging the scale and power of its Amazon Web Services division, the world’s leading cloud computing platform.
There’s no telling yet who will come out on top in this AI arms race — whether it’s OpenAI or Anthropic, and by extension, Microsoft or Amazon. But fortunately, investors don’t have to choose a side.
Thanks to thematic exchange-traded funds (ETFs), those interested in AI can invest in the long-term growth of the entire industry while mitigating company-specific risks like competition or potential antitrust regulation.
“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, director of thematic research 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 |
| Xtrackers Artificial Intelligence and Big Data ETF (XAIX) | 0.35% |
| Global X Artificial Intelligence & Technology ETF (AIQ) | 0.68% |
| Global X Robotics & Artificial Intelligence ETF (BOTZ) | 0.68% |
| Invesco AI and Next Gen Software ETF (IGPT) | 0.58% |
| Roundhill Generative AI & Technology ETF (CHAT) | 0.75% |
| REX AI Equity Premium Income ETF (AIPI) | 0.65% |
Xtrackers Artificial Intelligence and Big Data ETF (XAIX)
The lowest-cost, U.S.-listed, pure-play AI ETF on the market is currently XAIX. For a 0.35% expense ratio, this ETF tracks the Nasdaq Global Artificial Intelligence and Big Data Index, which selects companies by screening for machine learning, image and speech recognition, and natural language processing patents filed. This ensures that the companies selected are actively investing in AI research and development.
“Many of the existing funds in the market utilize backward-looking mechanisms to determine if a company should be classified as an AI company,” says Arne Noack, regional investment head of Xtrackers, Americas, at DWS Group. “On the other hand, XAIX’s approach seeks to be forward-looking, as its underlying index screens for approved patents in fields related to AI.”
Global X Artificial Intelligence & Technology ETF (AIQ)
“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. Unlike the Nasdaq-100, AIQ’s benchmark, the Indxx Artificial Intelligence & Big Data Index, is not limited to Nasdaq-listed stocks, although it contains a large number of them.
The ETF currently has 84 holdings distributed fairly evenly in a non-top-heavy manner. Investors get exposure to leading tech like Tesla Inc. (TSLA), Netflix Inc. (NFLX), Oracle Corp. (ORCL), Salesforce Inc. (CRM), Meta Platforms Inc. (META) and Nvidia Corp. (NVDA). With $2.5 billion in assets under management, AIQ is one of the larger and more popular AI ETFs. It charges a 0.68% expense ratio.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
“We see BOTZ as a more niche play on applied automation,” Dessai says. Whereas AIQ’s portfolio had an overweight to technology companies, especially software developers and media platforms, BOTZ tilts more toward industrial and health care stocks. This, coupled with a higher emphasis on non-U.S. stocks from countries like Japan and Switzerland, makes BOTZ a unique option for AI exposure.
The most recognizable stock in BOTZ is arguably chipmaker Nvidia, which currently receives a high 13% allocation. Behind it in the No. 2 spot is Intuitive Surgical Inc. (ISRG), known for its robotic and remote surgical systems. The top holdings also include many Japanese manufacturing companies like Keyence Corp. (6861.T) and Daifuku Co. Ltd. (6383.T) that are known for automation. BOTZ charges a 0.68% expense ratio.
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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 ETF strategy at Invesco. When it comes to AI, Invesco’s pure-play thematic ETF is IGPT.
The benchmark for IGPT is 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. IGPT currently has 99 holdings and comes in cheaper than AIQ and BOTZ, with a 0.58% expense ratio.
Roundhill Generative AI & Technology ETF (CHAT)
AI ETFs can vary greatly. Some of the previous ETFs provide broad-based exposure, while others home in on applied automation and robotics over software. But if you want targeted exposure to the type of AI being worked on by OpenAI and Anthropic, called generative AI, the ETF to buy is CHAT. This actively managed ETF does not track an index, rather it picks stocks based on fundamental research.
“CHAT 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,” explains Dave Mazza, CEO at Roundhill Investments. “Companies are then scored and selected based on their exposure to AI, market capitalization and liquidity.”
REX AI Equity Premium Income ETF (AIPI)
AI companies are, by and large, growth stocks. This means most of their free cash flow is reinvested toward research and development, or in some cases, allocated for share buybacks. On the whole, they rarely pay dividends, with most of the previously mentioned AI ETFs having low yields. If you want high income and AI exposure, consider a covered call ETF like AIPI.
“AIPI’s covered call strategy generates a considerable amount of income by selling call options on each of the individual holdings,” says Scott Acheychek, COO at REX Financial. “This provides a rare income source in a sector not typically associated with dividends.” Thanks to the high volatility of AI stocks, AIPI currently has a 34.8% annualized distribution yield, with a monthly payout frequency.
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6 of the Best AI ETFs to Buy for 2025 originally appeared on usnews.com
Update 12/03/24: This story was previously published at an earlier date and has been updated with new information.
