Investing in Artificial Intelligence: Exploring Top AI ETFs in 2024

For investors keen on tapping into this burgeoning market, the best AI ETFs present a compelling opportunity in 2024. These ETFs offer diversified exposure to a selection of companies leading the charge in AI innovations.

With the AI sector is experiencing explosive growth, we can expect this sector to reach an impressive $136.6 billion in 2022 and projected to soar past $1.8 trillion by 2030.

Across various sectors like healthcare, finance, manufacturing, and transportation, AI is reshaping industries with its data analysis, task automation, and decision-making capabilities.

You can access the potential of this dynamic market without the complexities of selecting individual stocks by doing your due diligence in searching for the best AI ETF to invest in.

So, what is the best ETF for AI investment? Look no further than the array of AI-focused ETFs, poised to harness the growth potential of this transformative technology.

What are AI ETFs?

AI ETFs are like investment bundles.

They work similar to stocks, but instead of owning just one company, you own a bunch of them all at once. These bundles, called Exchange-Traded Funds (ETFs), trade on stock exchanges and include different things like stocks, bonds, or commodities.

Now, AI ETFs focus specifically on companies involved in artificial intelligence, which is a fancy term for smart computer stuff. These companies are the ones working on things like teaching computers to learn, understand language, see things, or even do tasks like robots.

These ETFs give investors a chance to invest in companies that make hardware, software, and technologies for artificial intelligence, data analysis, big data, semiconductors, machine learning, automation, robotics, cloud computing, and AI-based services.

There are many AI ETFs out there, each with its own twist. Some cover a wide range of AI uses, while others zoom in on specific areas within the AI world.

 

Factors to Consider When Choosing The Best AI ETF 2024 (For Investors)

Investing is as simple as taking your time out using a smart approach to find the best AI ETF to invest that could be winners for you. Here’s how to do it:

1. Investment Goals and Risk Tolerance

Start by thinking about what you want from your investment and how much risk you’re okay with to invest in the best AI ETF.

Do you want slow and steady growth over a long time, or are you okay with more ups and downs for a chance at bigger gains?

AI can be unpredictable, like other tech stuff. If you’re not big on risk, you might like ETFs that cover lots of different companies in different industries.

But if you’re cool with taking more risk for a shot at bigger rewards, you might look into ETFs that focus on new and exciting parts of AI or smaller companies with lots of room to grow.

2. Expense Ratios and Fees

When it comes to ETFs, you’ll want to pay attention to the ongoing fees known as expense ratios. Since ETFs are managed passively, lower expense ratios mean more of the ETF’s returns stay in your pocket.

It’s important to research and compare expense ratios among different AI ETFs.

Even a small difference in percentage points can have a big effect on your returns over time.

For instance:

Let’s compare two well-known AI ETFs:

• iShares Robotics and Artificial Intelligence ETF (IRBO)
• Global X Robotics & Artificial Intelligence ETF (BOTZ).

IRBO has a competitive expense ratio of 0.47%, whereas BOTZ has a slightly higher expense ratio of 0.69%.

Though the difference may seem minor, IRBO’s lower expense ratio over long investment periods could lead to considerable savings for you.

If both ETFs perform similarly, IRBO’s lower expenses mean you get to keep more of your earnings.

3. Portfolio Holdings and Diversification

Take a close look at the companies each AI ETF invests in. It’s good to see a mix of well-established firms and promising startups.

While big names provide stability, having some high-growth potential companies can boost future profits.

The best ETFs will spread their investments across different AI areas like machine learning, computer vision, and natural language processing to reduce risks.

4. Historical Performance (Keep in Mind, Past Performance Doesn’t Predict Future Results)

While you can’t rely solely on past performance, it can give you an idea of how an ETF has done in the past. Compare its performance to benchmarks like the S&P 500 or other AI-focused ETFs.

This can help you understand its volatility and risk level over time.

In short, it is crucial to consider these factors to help you narrow down your choices and find AI ETFs that match your investment goals and risk tolerance.

For example:

Let’s say you are thinking about two AI ETFs: ROBO (Global X Robotics & Automation) and IYW (iShares U.S. Technology ETF). You know that how they did in the past does not tell you exactly how they will do in the future, but you still want to use it to see how risky they are.

Here’s what you can do:

• Check Past Data: Look at the price charts for both ETFs from before on a finance website or your brokerage platform. You can compare them for different times, like 1 year, 3 years, or 5 years.
• Study Volatility: See how much the prices of each ETF went up and down. ROBO might have big swings, showing it’s more likely to change a lot, while IYW might have smaller changes, showing it’s less likely to change a lot.
• Compare Profits: Figure out how much money each ETF made every year over the time you picked. More money might look good, but it usually means more risk (like big changes in prices).
• See against Other Things: See how each ETF did compared to the S&P 500, which is a big group of lots of companies. If an AI ETF always did better than the S&P 500, it might be a riskier investment.
• Look at Other AI ETFs: Look at how other AI ETFs did. If ROBO always did worse than other AI ETFs, it might not be the best choice.

By looking at past performance along with other things like how much it costs and what it has, you can figure out how risky each AI ETF is.

For People Who Don’t Like Risk (if you are A Risk Averse): If you care more about being safe, you might like IYW better because it might not change a lot, and it covers more tech stuff, even if it means not getting all the AI growth.

For People Who Don’t Mind Risk (If you are a Risk Taker): If you are okay with bigger changes, you might like ROBO more because it might make you more money in AI, even if it might change a lot.

Remember: Looking at their past performance is just one part of the equation. Look at everything carefully and consider how much risk you can handle before deciding to invest.

Following this, we will explore some of the best AI ETFs to invest with strong potential in the next section.

 

Best AI ETFs to Consider in 2024

What is the best ETF for AI?

The world of AI ETFs presents many choices for investors looking to tap into this rapidly growing sector.

Here is a breakdown of some of the best AI ETF 2024, highlighting key factors to consider before making an investment decision:

1. Robo Global Robotics and Automation Index ETF (NYSEARCA: ROBO)

• Expense Ratio: 0.95%
• Investment Focus: Global Robotics & Automation
• Largest Holdings: NVIDIA Corporation (NASDAQ:NVDA), a prominent player in the technology industry with significant contributions to artificial intelligence (AI). The ETF’s underlying index likely recognizes NVIDIA’s established track record within the AI sector and its potential to benefit from the anticipated near-term growth in AI.

ROBO provides diversified exposure to companies in the robotics and automation sector, with some involvement in AI applications.

It tends to favor well-established companies, which may offer stability.

However, its broader focus could dilute pure AI exposure for some investors.

2. First Trust Nasdaq Artificial Intelligence and Robotics ETF (NASDAQ: ROBT)

• Expense Ratio: 0.65%
• Investment Focus: US-based AI & Robotics
• Largest holdings: SentinelOne (S), a leading cybersecurity force, employs AI to revolutionize threat defense. Their Singularity Extended Detection and Response (XDR) platform empowers organizations to combat cyberattacks proactively.

What is the best ETF for AI?

Check out this AI ETF – ROBT that tracks a selection of US-listed companies engaged in AI and robotics development, with a focused investing in common stocks and depository receipts.

This ETF offers exposure to established firms and emerging players, potentially striking a balance between stability and growth.

3. ROBO Global Artificial Intelligence ETF (NASDAQ: THNQ)

• Expense Ratio: 0.68%
• Investment Focus: Global AI
• Largest Holdings: Advanced Micro Devices, Inc. (NASDAQ: AMD), a prominent semiconductor company with a global presence, specializing in the Data Center, Client, Gaming, and Embedded segments.

THNQ, from the same issuer as ROBO, concentrates specifically on companies leading AI development worldwide.

The portfolio of this best AI ETF 2024 consists of companies engaged in various aspects of AI development, including technology, infrastructure, computing, data, and cloud services.

Additionally, it includes companies applying AI across sectors such as e-commerce, healthcare, and business processes.

The ETF aims to replicate the price and yield performance of the ROBO Global Artificial Intelligence Index.

4. iShares U.S. Technology ETF (NYSEARCA: IYW)

• Expense Ratio: 0.40%
• Investment Focus: Broad US Technology
• Largest Holdings: Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), NVIDIA Corporation (NASDAQ: NVDA), Meta Platforms, Inc. (NASDAQ: META)

IYW is not solely dedicated to AI, but this is one of the best AI ETF 2024 which includes many leading tech companies heavily involved in AI.

This ETF is exposed to U.S. electronics, computer software and hardware, and information technology companies.

With a lower expense ratio and broader diversification, it may attract investors seeking a less volatile option within the tech sector with significant AI influence.

5. WisdomTree Artificial Intelligence and Innovation Fund (CBOE: WTAI)

• Expense Ratio: 0.45%
• Investment Focus: Global AI & Innovation
• Largest Holdings: Arm Holdings plc (NASDAQ: ARM), which specializes in the design, development, and licensing of central processing units (CPUs), microprocessors, intellectual property (IP) for systems, graphics processing units (GPUs), physical IP, software, and related services.

WTAI offers diversified exposure to global companies specifically focused on AI and innovation.

This ETF may suit investors interested in the broader AI ecosystem beyond established players.

6. Franklin Exponential Data ETF (CBOE: XDAT)

• Expense Ratio: 0.50%
• Investment Focus: Global Big Data & AI
• Largest Holdings: Microsoft Corporation (NASDAQ: MSFT)

Launched in 2021, the Franklin Exponential Data ETF (XDAT), another of the best AI ETFs to invest in, actively seeks companies at the forefront of the data revolution.

Its focus extends beyond just big data to encompass the infrastructure that powers it and its cutting-edge applications like AI, augmented reality, and personalized healthcare.

XDAT leverages a team known for its investment expertise in innovation and employs a rigorous bottom-up research approach to select its holdings.

This ETF exposes the data infrastructure supporting AI development, potentially complementing pure AI plays.

7. Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ)

• Expense Ratio: 0.68%
• Investment Focus: Global AI & Technology
• Largest Holdings: Meta Platforms, Inc. (NASDAQ: META)

The Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ) concentrates on investing in companies positioned to capitalize on the progress and growing acceptance of artificial intelligence technology.

It follows the performance of the Indxx Artificial Intelligence & Big Data Index.

AIQ offers diversified exposure to companies leading AI and related technologies worldwide.

Similar to THNQ, it focuses on pure AI plays, offering potential growth but with increased risk.

8. QRAFT AI-Enhanced U.S. Large Cap ETF (NYSE: QRFT)

• Expense Ratio: 0.50%
• Investment Focus: AI-driven US Large Cap Selection
• Largest Holdings: Apple Inc. (NASDAQ: AAPL)

The QRAFT AI-Enhanced U.S. Large Cap ETF (QRFT), established in 2019, takes a unique approach to investing in US large-cap companies.

It actively manages its portfolio by utilizing artificial intelligence to select and weight holdings based on five key factors: quality, size, value, momentum, and low volatility.

This innovative approach may appeal to risk-averse investors seeking AI exposure within familiar large-cap stocks.

 

Additional Considerations and Potential Risks

Before you decide which of the best AI ETF to invest in, it is important to consider some additional risks, including:

• Tech Sector Volatility: AI ETFs can be influenced by the natural ups and downs of the technology sector. Swift advancements and innovations may lead to price fluctuations within the ETF.
• Evolving AI Landscape: The AI field is continually evolving, with new technologies and competitors emerging. This dynamic environment has the potential to disrupt established companies held within the ETF.
• Thematic Focus: AI ETFs may give you a mix of companies, but they’re still mostly about one thing – Artificial Intelligence. If the AI sector has a hard time, your investment might not do well.
• Higher Costs: AI ETFs often have higher fees than broader index funds. Think about how much you’re paying to be part of the “AI story” and if it’s worth it compared to how much you could make.
• Active Management in a Passive Package: Some AI ETFs pick stocks actively, even though they’re supposed to track a passive index. This might mean higher fees and less predictable performance compared to truly passive ETFs.
• Ethical Issues: Using and making AI brings up questions about privacy, fairness, and how it might affect jobs. Make sure you’re okay with the ethical side of your investment.
• Lack of Transparency: Some AI ETFs don’t explain exactly how they pick the companies they invest in, which makes it difficult to determine their riskiness.

 

How to buy AI ETFs

Investing in AI ETFs is a good way to get into the growing artificial intelligence market. Here’s a step by step guide to buying AI ETFs:

Step 1: Start with a Brokerage Account

You will need a brokerage account to buy ETFs. Many online brokers offer free ETF trades, which can save you money.

Look into different brokers to find one that fits your investment needs and fees.

Here are some online brokers for you to consider:

1. Fidelity: Top Pick for ETF Trading Online

Account Minimum: $0

Fees: $0 for ETF trades

Fidelity is a good choice due to its commitment to customer satisfaction, including increased staff and new platform features. Their mobile platform improvements for all trading, including ETFs, stand out.

Notably, Fidelity’s introduction of fractional share trading for ETFs sets it apart.

Advantages:

• Customizable trading dashboard
• Digital, direct indexing
• Fractional shares trading available for over 7,000 U.S. stocks and ETFs

Disadvantages:

• Higher fees for broker-assisted trades
• Minimum balance required for some index trading
• Limited physical branch locations

2. Interactive Brokers: Leading ETF Research Platform

Account Minimum: $0

Fees: $0 for ETF trades

Interactive Brokers earns the title of the best for ETF research due to its comprehensive platforms and tools that assist both customers and non-customers in accessing real-time, global market data.

Its ETF scanner is particularly notable for analyzing financial metrics and market prices across more than 150 global markets.

Advantages:

• Extensive range of products
• ETF commission rebate program
• Broad global market access

Disadvantages:

• IBKR’s SmartRouting not accessible to IBKR Lite clients
• Tiered fee-based pricing structure may be confusing
• May be too complex for novice investors

3. Charles Schwab: Top ETF Screeners Provider

Account Minimum: $0

Fees: $0 for ETF trades

Charles Schwab is recognized as the top broker for ETF screeners, offering a diverse range of trading platforms and tools, including a robust ETF screening tool.

With direct access to accounts through Schwab.com or the Schwab Mobile app, investors benefit from convenient management.

Featuring real-time market research data and an excellent screener, Charles Schwab streamlines investment decisions.

Advantages:

• Powerful StreetSmart Edge ETF screener
• Robust and customizable trading platforms and tools
• Automated investing options
• Overall solid brokerage services

Disadvantages:

• High transaction fees for certain mutual funds
• Minimum investment required for Schwab Intelligent Portfolios account
• Lack of fractional share trading in ETFs

Step 2: Pick Your AI ETF

Once you have read this article and done some more research, choose an AI ETF that matches what you want to achieve with your investment and how much risk you’re okay with.

Look at things like:

• What the ETF focuses on: Is it worldwide or just in the US? Does it specialize in certain parts of AI, or does it cover a wide range of tech with a big AI influence?
• How much it costs: Lower fees mean you keep more of your profits.
• How spread out it is: Check if the ETF invests in lots of different companies and sectors.

Step 3: Add Money to Your Account

Put money into your brokerage account using a bank transfer or electronic check.

The smallest amount you need to deposit can vary depending on your broker.

Step 4: Make Your Purchase

Once your money is in your account, go to the “Trade” or “Order” section of your broker’s website or app.

Look up the ticker symbol of the AI ETF you’ve picked (like ROBO or ROBT) and say how many shares you want to buy.

Types of Orders: You can pick between different types:

• Market Order: Buys the ETF at the current price.
• Limit Order: Sets the highest or lowest price you’re willing to pay for the shares.

Step 5: Keep an Eye on Your Investment

Keep an eye on how your AI ETF and your overall investment portfolio are doing.

Remember, investing comes with risks, and what did well before might not do well in the future.

Check your investments often and change your plan if you need to.

Extra Tips:

• Start with a small investment to try things out before putting in more money.
• AI and tech can go up and down a lot. Think of AI ETFs as a long-term investment to handle any short-term ups and downs.
• Don’t put all your money in one place. Spread your investments across different types of assets to lower your risk.

 

Conclusion

As the AI market grows fast, many look for the “best AI ETF” or “best AI ETF for 2024.” While there’s no one-size-fits-all answer, this article shared some of the ideas on the best AI ETF to invest in 2024 and other factors for you to consider before putting your hard-earned money into it.

Remember, the best AI ETF depends on what you want and how much risk you’re okay with. Think about things like how much it costs, how spread out it is, and what it focuses on in AI.

Doing thorough research and maybe talking to a financial advisor can help you choose wisely and take advantage of AI’s exciting possibilities through ETFs.

 

Disclaimer:

The content provided in this article serves for informational purposes exclusively and should not be construed as financial advice. Investing in AI ETFs carries inherent risks, and previous performance does not guarantee future outcomes. Prior to making any investment choices, it’s advisable to seek guidance from a certified financial advisor who can take into account your unique financial circumstances and risk tolerance. We are not financial experts, and nothing presented here should be interpreted as a suggestion to purchase or sell any security.