Identifying the best AI stocks can be difficult. The solution is a thematic exchange-traded fund that offers targeted, pure-play exposure to a basket of AI stocks.
“The buzz around AI cannot be avoided and rightfully so, as it can reshape every aspect of how we live, work and invest, especially with ChatGPT’s arrival,” says Christopher Gannatti, global head of research at WisdomTree.
To help investors find the best AI ETFs for 2024, we ranked six thematic ETFs on numerous factors, including their total assets, expense ratios, underlying index and strategy.
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Best AI ETFs
- ficial Intelligence ETF (BOTZ).
- iShares Robotics and Artificial Intelligence Multisector ETF (IRBO).
- .
- First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT).
- WisdomTree Artificial Intelligence and Innovation Fund (WTAI).
- .
Global X Robotics & Artificial Intelligence ETF (BOTZ)
Expense ratio
0.68%
Total assets
$2.7 billion
Why it made our list
The most popular AI ETF on this list in terms of total assets is BOTZ, which sits at around $2 billion. This ETF debuted in September 2016, tracking the Indxx Global Robotics & Artificial Intelligence Thematic Index. It holds companies that are poised to benefit from increased adoption of not only AI, but also general industrial and health care robotics and automation. BOTZ also includes a sizable allocation to technology sector stocks that develop, manufacture and deploy AI and create robotic solutions.
Pros and cons
Pros
- A large AUM.
- A decent track record dating back to 2016.
- A low dividend yield provides tax efficiency.
Cons
- For investors seeking AI-only exposure, the ETF includes robotics and automation stocks.
- BOTZ holds industrial and health care companies that use AI instead of developing it.
- A higher expense ratio.
More details
- 1-year return as of June 30: 7.51%.
- Inception date: Sept. 12, 2016.
Global X Artificial Intelligence & Technology ETF (AIQ)
Expense ratio
0.68%
Total assets
$2.1 billion
Why it made our list
As an alternative to BOTZ, Global X also offers AIQ, which tracks the Indxx Artificial Intelligence & Big Data Index. This ETF excludes robotics and automation stocks to solely focus on companies that develop and utilize AI and provide hardware for big data and AI applications. Compared to BOTZ, AIQ has a higher allocation to technology sector stocks and a lower allocation to industrial and health care stocks due to the lack of robotics and automation exposure.
Pros and cons
Pros
- More of an AI focus than BOTZ.
- Globally diversified across developed and emerging market countries.
- Low dividend yield provides tax efficiency.
Cons
- Charges a relatively high expense ratio.
- Lower allocation to sectors outside of tech.
- AIQ is about 70% concentrated in U.S. stocks.
More details
- 1-year return as of June 30: 27.66%.
- Inception date: May 11, 2018.
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT)
Expense ratio
0.65%
Total assets
$522.2 million
Why it made our list
ROBT tracks the Nasdaq CTA Artificial Intelligence and Robotics Index and employs a unique screening system to classify its holdings as either AI or robotics “enablers, engagers and enhancers.” This categorization scheme sorts companies based on whether they develop robotics or AI components, design AI systems or provide value-added services, respectively. Eligible stocks that meet the minimum market cap, trading volume and free float requirements are scored based on their degree of involvement in each enabler, engager and enhancer category, with the top 30 companies in each selected. Categories are assigned different weights, with engagers receiving the most representation at 60%, enablers at 25% and enhancers at 15%. Within each category, holdings are equally weighted.
Pros and cons
Pros
- Provides exposure to AI engagers, defined as “companies that design, create, integrate or deliver robotics and/or AI in the form of products, software or systems.”
- Globally diversified across developed and emerging market countries.
- Low dividend yield provides tax efficiency.
Cons
- Charges a relatively high 0.65% expense ratio.
- Lower AUM.
- The equal-weight methodology could result in reduced gains from large-cap AI stocks.
More details
- 1-year return as of June 30: -7.05%.
- Inception date: Feb. 21, 2018.
WisdomTree Artificial Intelligence and Innovation Fund (WTAI)
Expense ratio
0.45%
Total assets
$295.8 million
Why it made our list
WTAI tracks the proprietary WisdomTree Artificial Intelligence & Innovation Index, which includes companies both developing and deploying AI. The ETF includes sectors outside of technology and focuses on companies with high growth potential. Around three-quarters of the ETF’s holdings are held in U.S. stocks, and approximately 80% of holdings are classified as technology sector companies.
Pros and cons
Pros
- The lowest expense ratio on this list of 0.45%.
- Focuses primarily on AI and not robotics or automation.
- Offers some global diversification across developed and emerging markets.
Cons
- Lower AUM.
- WTAI is mostly concentrated in U.S. stocks.
- Relatively recent inception date of December 2021.
More details
- 1-year return as of June 30: 9.82%.
- Inception date: Dec. 7, 2021.
Roundhill Generative AI & Technology ETF (CHAT)
Expense ratio
0.75%
Total assets
$187.6 million
Why it made our list
CHAT is the newest ETF on this list, having debuted in May 2023. The ETF is actively managed and does not track a benchmark index. Rather, Roundhill selects a portfolio of 36 companies involved in generative AI as platforms, infrastructure, enterprise software or consumer software providers. This includes large-cap tech stocks (such as Google and Amazon) developing or investing in AI, pure-play AI companies and semiconductor stocks.
Pros and cons
Pros
- High exposure to large-cap U.S. tech stocks.
- Has a generative AI focus and is not robotics or automation.
- Globally diversified with a focus on U.S. and Chinese markets.
Cons
- High 0.75% expense ratio.
- Some investors may not prefer an actively managed ETF.
- The very most recent inception date of May 2023.
More details
- 1-year return as of June 30: 29.64%.
- Inception date: May 17, 2023.
Compare the best AI ETFs
| FUND (TICKER) | EXPENSE RATIO | 1-YEAR RETURN AS OF JUNE 30 | ||||
|---|---|---|---|---|---|---|
| 0.69% | 7.51% | ||||
| ||||||
| 0.47% | 1.26% | ||||
| ||||||
| 0.68% | 27.66% | ||||
| ||||||
| 0.65% | -7.05% | ||||
| ||||||
| 0.45% | 9.82% | ||||
| ||||||
| 0.75% | 29.64% | ||||
|
Methodology
Our curated rankings of the top AI ETFs were created by applying a screen of several “must-have” metrics:
- Total assets: All AI ETFs on this list have accrued at least $50 million in total assets.
- Exposure: ETFs on this list must offer substantial, majority exposure to AI-themed stocks and not be broad tech sector ETFs with some AI exposure.
- Type: AI ETFs featuring leveraged, inverse or single-stock exposure are ineligible for this ranking, as are ETFs that only use AI to power their investment strategy.
- Expense ratios: To qualify for this ranking, an AI ETF cannot charge a net expense ratio higher than 0.75%.
Why other funds didn’t make the cut
We began our rankings by screening out ETFs that do not offer “pure play” AI exposure. For instance, technology thematic ETFs, automation and robotics ETFs, and innovation thematic ETFs that do not make AI an explicit and majority focus in their name, index or prospectus were excluded from consideration.
We also excluded ETFs that use AI to help make investment decisions. While these ETFs utilize AI, they are not AI ETFs per se, as their underlying basket of investments does not have an AI focus. Instead, these ETFs use AI to guide their investment strategies instead of investing in AI companies.
AI ETFs with a short-term focus were excluded. These funds namely those offering inverse and leveraged exposure. These ETFs are intended as trading tools and unsuitable for a long-term buy-and-hold strategy due to higher expense ratios and volatility.
Because the AI theme is relatively new, we wanted to ensure that investors could find the more established, larger offerings on the market. As a result, we set a minimum total assets requirement of $50 million. This helped us filter out smaller, newer or less popular ETFs at a higher risk of closing down due to an inability to attract sufficient assets.
Finally, we capped the maximum expense ratio for consideration in our rankings at 0.75%. Expense ratios directly affect the long-term expected returns of an ETF for investors. Keeping this as low as possible can help investors save money.
Why other funds didn’t make the cut
We began our rankings by screening out ETFs that do not offer “pure play” AI exposure. For instance, technology thematic ETFs, automation and robotics ETFs, and innovation thematic ETFs that do not make AI an explicit and majority focus in their name, index or prospectus were excluded from consideration.
We also excluded ETFs that use AI to help make investment decisions. While these ETFs utilize AI, they are not AI ETFs per se, as their underlying basket of investments does not have an AI focus. Instead, these ETFs use AI to guide their investment strategies instead of investing in AI companies.
AI ETFs with a short-term focus were excluded. These funds namely those offering inverse and leveraged exposure. These ETFs are intended as trading tools and unsuitable for a long-term buy-and-hold strategy due to higher expense ratios and volatility.
Because the AI theme is relatively new, we wanted to ensure that investors could find the more established, larger offerings on the market. As a result, we set a minimum total assets requirement of $50 million. This helped us filter out smaller, newer or less popular ETFs at a higher risk of closing down due to an inability to attract sufficient assets.
Finally, we capped the maximum expense ratio for consideration in our rankings at 0.75%. Expense ratios directly affect the long-term expected returns of an ETF for investors. Keeping this as low as possible can help investors save money.
Methodology
Our curated rankings of the top AI ETFs were created by applying a screen of several “must-have” metrics:
- Total assets: All AI ETFs on this list have accrued at least $50 million in total assets.
- Exposure: ETFs on this list must offer substantial, majority exposure to AI-themed stocks and not be broad tech sector ETFs with some AI exposure.
- Type: AI ETFs featuring leveraged, inverse or single-stock exposure are ineligible for this ranking, as are ETFs that only use AI to power their investment strategy.
- Expense ratios: To qualify for this ranking, an AI ETF cannot charge a net expense ratio higher than 0.75%.
Final verdict
AI ETFs can provide investors with diversified exposure to a broad basket of companies involved in AI development and deployment. With an AI ETF, investors can reduce the risk of an individual stock underperforming and instead participate in the industry’s overall growth.
Our pick for the best AI ETF goes to iShares Robotics and Artificial Intelligence Multisector ETF (IRBO). IRBO’s 0.47% expense ratio is competitively priced in the AI ETF category, coming in nearly 30 basis points lower than many of the other AI ETFs featured here.
BlackRock iShares, a notable ETF provider with a long track record of success and a diverse fund lineup, also backs IRBO. Finally, its equal-weight index spans the entire global AI industry, which can limit concentration risk.
What is AI?
IBM defines AI as “a field, which combines computer science and robust datasets, to enable problem-solving.” Simply put, AI is like teaching a computer to think and learn much like a human does. It involves allowing machines to learn from experiences and use that learned information to make decisions based on it. Part of the process is that AI corrects itself when it makes mistakes. This ability allows computers to perform tasks more independently and efficiently.
For example, ChatGPT is an AI chatbot. It learns from a vast amount of text data it was trained on, understands the context of your questions and generates responses accordingly. When it encounters new queries or makes mistakes, it can adjust and improve over time based on feedback. This makes it efficient at having humanlike text conversations, solving problems and carrying out various complex tasks.
Other ways to invest in AI
Aside from AI ETFs, other investment avenues include direct investments in AI-focused companies, mutual funds with an AI emphasis and venture capital funds that invest in AI startups. You may also consider equity crowdfunding platforms where smaller investors can participate in early-stage AI funding rounds.
Should you buy AI ETFs?
The decision of whether or not to buy an AI ETF — like any investment decision — should be based on your personal risk tolerance, financial objectives and investment time horizon.
AI ETFs, as thematic funds, often focus on a specific sector or industry — in this case, artificial intelligence and its associated technologies. This specialization is both their allure and their potential pitfall.
A noticeable feature of these thematic ETFs is that they are highly specialized. Unlike regular broad-market index ETFs that diversify across multiple sectors, AI ETFs have a pronounced sector concentration. This can lead to two main concerns for investors.
- First, these ETFs frequently come with higher expense ratios due to their specialized nature. Over time, these fees can eat into potential returns.
- Second, because of their concentrated exposure to the AI sector, these ETFs may exhibit greater volatility compared to their broad-market counterparts. This means the value of your investment can fluctuate more widely, especially if the AI sector faces challenges or disruptions.
Moreover, investing in AI, even through an ETF, can be seen as an active management approach, as investors are making a bet on the continued growth and dominance of artificial intelligence within the marketplace.
While the potential of AI is undeniable, there’s a risk of underperforming the broader market. Research, due diligence and strong conviction are essential for investors, but even with these, there’s no guarantee of outperformance.
There’s a phenomenon in investing where anticipated events or trends become “priced in,” meaning the market has already accounted for the expected growth. Consequently, investors might run the risk of buying into an AI ETF after much of the hype and potential growth has already been realized, which could limit future returns.
Frequently asked questions (FAQs)
There’s no one-size-fits-all answer to this question, as the best way to invest in AI largely depends on your risk tolerance, investment goals and knowledge of the AI sector. But for many investors, AI ETFs offer a balanced mix of exposure and diversification. They allow investors to capture the growth of the entire sector without the need to pick and monitor individual stocks.
As of October 2023, Vanguard does not offer a dedicated AI ETF. The closest the firm has is the Vanguard Information Technology ETF (VGT), which tracks technology sector stocks and may include some AI exposure. However, it does not focus on AI stocks or hold them as a majority.
The largest ETF that provides pure-play exposure to AI stocks in terms of the highest total assets is currently the Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ).
Like all equities, investing in AI is not inherently “safe” in the sense that there’s a potential for the loss of principal, and returns are never guaranteed. All stock market investments carry some degree of risk, and AI is no exception.
While AI presents tantalizing growth prospects given its transformative potential across various sectors, it also comes with industry-specific risks that investors should be aware of.
One risk is the nascent nature of many AI technologies. Being in their early stages of development or application, there’s a level of uncertainty regarding how these technologies will evolve, their scalability and their eventual mass-market adoption. This can translate to unpredictable company earnings and stock price volatility.
Another risk stems from the highly competitive nature of the AI space. While competition can spur innovation, it also means that even companies at the forefront of AI today might be surpassed by competitors or new entrants tomorrow.
Rapid technological advancements can render a company’s current AI solutions obsolete, potentially leading to significant financial losses for investors.
Regulatory and ethical considerations also pose risks. Governments around the world are grappling with how to regulate AI technologies, especially concerning privacy, data security and ethical applications. Any stringent regulations or policy shifts could impact the profitability or viability of companies in the AI sector.
