ETFs
Here’s My Best Artificial Intelligence (AI) ETF to Buy Right Now
If you don’t have time to spend researching stocks, ETFs are a great solution.
Between work, family, hobbies and other commitments, most people don’t have hours to dedicate to stock market research. Plus, let’s face it. Selection of individual titles is more difficult and riskier than buying a basket of companies. This makes exchange traded funds, or ETF, an attractive vehicle. ETFs trade like stocks, but funds hold dozens of stocks related by a specific theme. Several ETFs target the most dynamic sector of the market: artificial intelligence (AI).
There is a lot of hype around AI, and this enthusiasm is justified. Companies spend billions of dollars researching real-world solutions and bringing them to market, and organizations across many industries are already integrating Generative AI And large language models (LLM) in workflows. The effectiveness of these tools and our ultra-competitive business world will encourage more companies to adopt them.
According to one estimate, the global market size will approach $2 trillion by the end of this decade, as shown below.
Image source: Statista.
What are the best artificial intelligence ETFs?
Not all ETFs are created equal. Factors such as diversification, assets under management, historical performance and expense ratio are important. THE Global X Robotics and Artificial Intelligence ETF (BOTZ 0.13%) is a popular AI fund. It has assets under management of $2.8 billion and an expense ratio of 0.68%, which is competitive. Its portfolio currently includes 43 companies, focusing on those that “will benefit from increased adoption and use of robotics and artificial intelligence.”
BOTZ is heavily weighted toward its top holdings. Nvidia (NASDAQ: NVDA) makes up more than 10% of the fund and its top four holdings make up more than 35%. The fund underperformed SPDR S&P 500 ETF (NYSEMKT: SPY) over the past year, despite Nvidia gaining 248%.
Besides the reliance on a few top stocks, another potential downside is the lack of big tech stocks. BOTZ investors are missing something Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), Amazon (NASDAQ:AMZN), Meta (NASDAQ), and Microsoft (NASDAQ: MSFT), and even one of the my personal favorites, Arm holds (NASDAQ:ARM).
BOTZ is most suitable for investors looking for a well-managed portfolio with a few stocks and an outward focus on big tech.
Global Artificial Intelligence and Technology ETF (AIQ -0.21%). AIQ holds positions in 84 companies, has an expense ratio of 0.68%, and has crushed the S&P 500 over the past year, as you can see below.
SPY Total Return Level data by Y Charts
The Artificial Intelligence & Technology ETF has positions in all of the above stocks except Arm Holdings. Its main stock is also Nvidia, but it only represents 5% of the total. AIQ is best suited for those looking for a diversified portfolio with an emphasis on big tech. AIQ is an excellent choice with a tremendous recent track record.
Here is my favorite
However, my favorite AI ETF is the WisdomTree Artificial Intelligence and Innovation Fund (WTAI -1.11%). WTAI is the worst performing fund in the chart above, but that doesn’t mean it won’t outperform in the future. Nvidia and Microsoft represent almost 13% of the S&P 500 and 8% of the AIQ but less than 5% of the WTAI, which explains the underperformance. These stocks boomed last year, but they may soon reach their fair value and stabilize.
The WisdomTree Artificial Intelligence and Innovation Fund is the most diversified of the three funds I chose, with no company accounting for more than 3% of assets. She currently owns 75 stocks, including big names in technology. It also has the lowest expense ratio at 0.45%. Its largest investments are in semiconductors (33%) and AI software (24%), thriving sectors with significant room for growth as AI develops. Its recent underperformance could change quickly, as the semiconductor industry is cyclical and appears headed for a new up cycle after a rough 2022 and 2023.
WTAI is a great choice for those who want significant diversification, a low expense ratio, and exposure to the biggest names in the industry.
You don’t have to be a brilliant stock picker to capitalize on a booming sector like AI. Sometimes it is better to leave the choice to those who have more time to follow the actions. ETFs provide broad exposure with less risk and volatility. There are tons of options; maybe the one mentioned above is right for you.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bradley Guichard holds positions in Alphabet, Amazon, Arm Holdings and Nvidia. The Motley Fool holds positions and recommends Alphabet, Amazon, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.