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Robots and artificial intelligence (AI) are increasingly gaining precedence in our daily life. The pandemic-driven stay-at-home trend made these more important as we have become more dependent on technology. The growing accessibility and falling costs are also making the space more demanding and lucrative.
The global artificial intelligence market size was valued at $136.55 billion in 2022 and is projected to witness a compound annual growth rate (CAGR) of 37.3% from 2023 to 2030, per Grand View Research.The recent success of ChatGPT also made the space even more intriguing. ChatGPT is an artificial intelligence chatbot developed by OpenAI and launched in November 2022.
It is constructed on top of OpenAI's GPT-3 family of large language models and has been modified further using both supervised and reinforcement learning techniques. OpenAI has now been working on a more powerful version of the ChatGPT system called GPT-4, which is set to be released in 2023.
Worldwide revenues for the AI market were $383.3 billion in 2021, up 20.7% year over year, per IDC. Notably, IDC expects the AI market value to have reached about $450 billion in 2022 and maintain a year-over-year growth rate in the high teens throughout the five-year forecast.
How Hot Is Artificial Intelligence as an Investing Area?
Artificial intelligence can transform the productivity and GDP potential of the global economy, per a PWC article. PWC’s research reveals that 45% of total economic gains by 2030 will come from product enhancements, boosting consumer demand. This will be possible because AI will bring about product variety, with increased personalization and affordability. The maximum economic benefit from AI will be in China (26% boost to GDP in 2030) and North America (14.5% boost), per PWC.
Ark Investment Management founder Cathie Wood also sees it as a fast-growing area. “We were assuming that in the next 10 years, artificial intelligence would deliver, in the enterprise software space, a market cap opportunity of $30 trillion,” the star stockpicker said at a Milken Institute conference last month. “Our new number is $80 trillion,” per Cathie Wood, as quoted on a MoneyWise article.
Big Techs Foraying Into A.I. With Full Force
Microsoft (MSFT - Free Report) is investing billions into OpenAI, the creator of ChatGPT, and launched its new AI-powered Bing search and Edge browser. CEO Satya Nadella told CNBC that AI is the biggest thing to have happened to the company in the nine years since he took over (read: ChatGPT & AI Mania: Stocks & ETFs in Focus).
Alphabet (GOOGL - Free Report) , which has invested heavily in AI and machine learning over the past few years, rushed to roll out its chatbot competitor BARD. However, BARD failed to see initial success as it gave inaccurate information. Meta Platform is releasing a new AI tool LLaMA. Baidu (BIDU - Free Report) revealed its plan to launch ChatGPT-style ‘Ernie Bot’ in early Feb.
Apple (AAPL - Free Report) and Amazon (AMZN - Free Report) also have enormous roles to play in the field, according to Wedbush, as quoted on Fortune. In a nutshell, the AI war among tech behemoths is heating up as generative technologies capture investors’ attention.
Not only these big techs, there are many small-scale A.I. companies that could be tapped at a go with the ETF approach. Against this backdrop, below, we highlight a few artificial intelligence ETFs that are great bets now.
The first actively managed ETF to fully utilize artificial intelligence as a method for stock selection. The $120.3-million fund charges 75 bps in fees. The fund holds 141 stocks in total. Novavax (4.75%), Oracle (4.69%) and Citigroup (3.90%) hold the top three positions.
The ROBO Global Robotics and Automation Index ETF (ROBO - Free Report)
The ROBO Global Robotics and Automation Index ETF is the first in the space, following the ROBO Global Robotics and Automation Index, which measures the performance of companies that derive a portion of revenues and profits from robotics-related or automation-related products or services. The fund has an asset base of $1.31 billion.
ROBO invests in about 80 global companies that are driving transformative innovations in robotics, automation, and AI. No stock accounts for more than 2.16% of the fund. The fund ROBO charges 95 bps in fees.
The Global X Robotics & Artificial Intelligence ETF (BOTZ - Free Report)
The Global X Robotics & Artificial Intelligence ETF is the largest product in the space, with more than $1.52 billion in assets. The fund follows the Indxx Global Robotics & Artificial Intelligence Thematic Index invests in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence, including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
Intuitive Surgical (10.15%), ABB LTD (9.84%) and KEYENCE (9.37%) get the highest allocations in the portfolio of BOTZ. The fund charges 68 bps in fees.
iShares Robotics and Artificial Intelligence Multisector ETF has amassed about $275.6 million in assets. IRBO is the cheapest product in the space charging only 47 bps in fees. iShares Robotics and Artificial Intelligence Multisector ETF follows an equal-weighted index. No stock makes up more than 1.62% of the fund.
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT - Free Report)
The First Trust Nasdaq Artificial Intelligence and Robotics ETF follows the underlying Nasdaq CTA Artificial Intelligence and Robotics Index, which is designed to track the performance of companies engaged in Artificial intelligence, robotics and automation. The $213.3-million-fund follows a modified equal-weighted index. The 113-stock fund ROBT charges 65 bps in fees. No stock accounts for more than 2.69% of the fund.
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Guide to Artificial Intelligence ETFs
Robots and artificial intelligence (AI) are increasingly gaining precedence in our daily life. The pandemic-driven stay-at-home trend made these more important as we have become more dependent on technology. The growing accessibility and falling costs are also making the space more demanding and lucrative.
The global artificial intelligence market size was valued at $136.55 billion in 2022 and is projected to witness a compound annual growth rate (CAGR) of 37.3% from 2023 to 2030, per Grand View Research.The recent success of ChatGPT also made the space even more intriguing. ChatGPT is an artificial intelligence chatbot developed by OpenAI and launched in November 2022.
It is constructed on top of OpenAI's GPT-3 family of large language models and has been modified further using both supervised and reinforcement learning techniques. OpenAI has now been working on a more powerful version of the ChatGPT system called GPT-4, which is set to be released in 2023.
Worldwide revenues for the AI market were $383.3 billion in 2021, up 20.7% year over year, per IDC. Notably, IDC expects the AI market value to have reached about $450 billion in 2022 and maintain a year-over-year growth rate in the high teens throughout the five-year forecast.
How Hot Is Artificial Intelligence as an Investing Area?
Artificial intelligence can transform the productivity and GDP potential of the global economy, per a PWC article. PWC’s research reveals that 45% of total economic gains by 2030 will come from product enhancements, boosting consumer demand. This will be possible because AI will bring about product variety, with increased personalization and affordability. The maximum economic benefit from AI will be in China (26% boost to GDP in 2030) and North America (14.5% boost), per PWC.
Ark Investment Management founder Cathie Wood also sees it as a fast-growing area. “We were assuming that in the next 10 years, artificial intelligence would deliver, in the enterprise software space, a market cap opportunity of $30 trillion,” the star stockpicker said at a Milken Institute conference last month. “Our new number is $80 trillion,” per Cathie Wood, as quoted on a MoneyWise article.
Big Techs Foraying Into A.I. With Full Force
Microsoft (MSFT - Free Report) is investing billions into OpenAI, the creator of ChatGPT, and launched its new AI-powered Bing search and Edge browser. CEO Satya Nadella told CNBC that AI is the biggest thing to have happened to the company in the nine years since he took over (read: ChatGPT & AI Mania: Stocks & ETFs in Focus).
Alphabet (GOOGL - Free Report) , which has invested heavily in AI and machine learning over the past few years, rushed to roll out its chatbot competitor BARD. However, BARD failed to see initial success as it gave inaccurate information. Meta Platform is releasing a new AI tool LLaMA. Baidu (BIDU - Free Report) revealed its plan to launch ChatGPT-style ‘Ernie Bot’ in early Feb.
Apple (AAPL - Free Report) and Amazon (AMZN - Free Report) also have enormous roles to play in the field, according to Wedbush, as quoted on Fortune. In a nutshell, the AI war among tech behemoths is heating up as generative technologies capture investors’ attention.
Not only these big techs, there are many small-scale A.I. companies that could be tapped at a go with the ETF approach. Against this backdrop, below, we highlight a few artificial intelligence ETFs that are great bets now.
ETFs in Detail
AI Powered Equity ETF (AIEQ - Free Report)
The first actively managed ETF to fully utilize artificial intelligence as a method for stock selection. The $120.3-million fund charges 75 bps in fees. The fund holds 141 stocks in total. Novavax (4.75%), Oracle (4.69%) and Citigroup (3.90%) hold the top three positions.
The ROBO Global Robotics and Automation Index ETF (ROBO - Free Report)
The ROBO Global Robotics and Automation Index ETF is the first in the space, following the ROBO Global Robotics and Automation Index, which measures the performance of companies that derive a portion of revenues and profits from robotics-related or automation-related products or services. The fund has an asset base of $1.31 billion.
ROBO invests in about 80 global companies that are driving transformative innovations in robotics, automation, and AI. No stock accounts for more than 2.16% of the fund. The fund ROBO charges 95 bps in fees.
The Global X Robotics & Artificial Intelligence ETF (BOTZ - Free Report)
The Global X Robotics & Artificial Intelligence ETF is the largest product in the space, with more than $1.52 billion in assets. The fund follows the Indxx Global Robotics & Artificial Intelligence Thematic Index invests in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence, including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
Intuitive Surgical (10.15%), ABB LTD (9.84%) and KEYENCE (9.37%) get the highest allocations in the portfolio of BOTZ. The fund charges 68 bps in fees.
iShares Robotics and Artificial Intelligence Multisector ETF (IRBO - Free Report)
iShares Robotics and Artificial Intelligence Multisector ETF has amassed about $275.6 million in assets. IRBO is the cheapest product in the space charging only 47 bps in fees. iShares Robotics and Artificial Intelligence Multisector ETF follows an equal-weighted index. No stock makes up more than 1.62% of the fund.
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT - Free Report)
The First Trust Nasdaq Artificial Intelligence and Robotics ETF follows the underlying Nasdaq CTA Artificial Intelligence and Robotics Index, which is designed to track the performance of companies engaged in Artificial intelligence, robotics and automation. The $213.3-million-fund follows a modified equal-weighted index. The 113-stock fund ROBT charges 65 bps in fees. No stock accounts for more than 2.69% of the fund.