Back in 2010, Tesla’s stock was trading at a mere $17 per share. If you were like most investors, you probably missed the opportunity to invest in it. But don’t worry; now we have another once-in-a-lifetime opportunity in the form of AI.
The market share for AI is projected to reach an astounding $2 trillion by 2030, with a compounded annual growth rate of 37%. This means that investing in AI today could result in incredible returns in the coming years.
In this article, we will explore the top AI exchange-traded funds (ETFs) for 2023, enabling you to tap into this transformative technology and potentially profit from its growth.
Table of Contents
The Potential of AI Investments
The Promise of Compounding Growth
Imagine investing $100,000 today in an AI-focused ETF and enjoying a compound annual growth rate (CAGR) of 37% over the next seven years. By the end of that period, your investment could be worth nearly $1 million.
This extraordinary potential for growth makes the current era an exhilarating time to be an AI investor. With AI permeating various industries and revolutionizing how we live and work, the opportunities for investment are boundless.
Introducing the Top 10 AI ETFs
Diversifying Risk with ETFs
While individual AI stocks may appear too risky for some investors, ETFs provide a diversified approach. They offer exposure to a variety of companies that are driving AI innovation while minimizing risk. In this section, we will explore the top 10 AI ETFs for 2023. Please note that this list may not include every AI ETF available, so feel free to share any additional suggestions in the comments.
Criteria for Selection
To compile this list, several criteria were taken into account. The chosen ETFs were carefully selected to ensure they offered unique exposure to AI and avoided duplications. In cases where similar ETFs were identified, the one with the lower expense ratio was chosen. For a comprehensive overview of the research conducted, including updated stock prices and year-to-date performances, refer to the provided spreadsheet.
Roundhill Ball Metaverse ETF
Exploring the Metaverse's Potential
The Roundhill Ball Metaverse ETF presents a compelling investment opportunity. Despite reservations about the term “Metaverse” due to its previous lackluster reputation, this ETF comprises robust companies that will drive both AI and the Metaverse. With a focus on infrastructure, the ETF heavily relies on industry powerhouse Nvidia, known for its graphics card design.
Nvidia has also partnered with Microsoft and Amazon's AWS, reinforcing its role in AI-powered virtual machines and machine learning solutions. The ETF's top holdings, including Roblox, Tencent, and Sony, offer diversity by bridging the gaming and entertainment sectors.
Performance-wise, this relatively young ETF has a year-to-date return of 27.8% and holds 52 companies. While it may be riskier than some alternatives, its unique top holdings make it a distinctive choice.
iShares US Tech Breakthrough Multisector ETF
Investing in Technological Breakthroughs
The iShares US Tech Breakthrough Multisector ETF seeks to invest in US companies at the forefront of technological breakthroughs in various sectors, including robotics, AI, cloud computing, cybersecurity, and genomics. The ETF's top holdings offer a well-rounded mix, featuring Salesforce and Regeneron Pharmaceuticals.
Salesforce specializes in CRM software and has embraced AI solutions, while Regeneron leverages machine learning to accelerate the development of potential therapies and enhance productivity.
With a year-to-date return of 21.7% and 184 total holdings, this ETF strikes a balance between performance and diversity. Its expense ratio of 0.4% is lower than the average for the top 10 ETFs, further enhancing its appeal.
Global X Robotics and AI ETF
AI, Automation, and Industrial Robotics
The Global X Robotics and AI ETF focuses on investments in AI, automation, and industrial robotics. Its top holding, Intuitive Surgical, develops automated solutions and robots for the medical sector, including the renowned DaVinci surgical system. With a year-to-date return of 23.9% and an impressive 298 total holdings, this ETF stands out as the most diverse among the top 10. Its global mix provides an international flavor to investors' portfolios.
First Trust NASDAQ Artificial Intelligence and Robotics ETF
A Different Approach: Defense Companies
The First Trust NASDAQ Artificial Intelligence and Robotics ETF deviates from the usual suspects by including several leading defense companies. AeroVironment, known for its autonomous drones and weapons systems, and Kinetic, specializing in ground-based robotics, offer unique opportunities in the defense sector.
While investing in defense may not align with everyone's values, this ETF provides exposure to companies leveraging AI in unconventional ways, fostering diversified investment portfolios.
With a year-to-date return of 14.2% and 113 total holdings, this ETF exhibits lower performance but offers distinctive investment prospects. Its expense ratio stands at 0.65%.
Invesco NASDAQ Internet ETF
Powerhouse Players: Meta, Google, Microsoft, and Amazon
The Invesco NASDAQ Internet ETF features the expected key players in the AI realm. With Meta (formerly Facebook), Google, Microsoft, and Amazon as the top holdings, this ETF provides exposure to big tech companies poised for AI-driven growth. Meta, in particular, has embraced AI in its ads platform and social networks, while Amazon leverages AI to enhance programming and cloud services.
With a year-to-date return of 24.9% and 85 total holdings, this ETF offers a robust performance and reasonable expense ratio of 0.6%. Its concentration in major tech companies contributes to its appeal.
Invesco QQQ Trust Series 1 ETF
The Reliable Performer
The Invesco QQQ Trust Series 1 ETF may be a well-known player in the market, but its solid performance and low expense ratio cannot be ignored. With the usual high-tech suspects among its top holdings, this ETF is expected to experience strong growth in AI.
Its year-to-date return of 23.8% across 102 companies and an expense ratio of 0.2% make it an appealing option for investors seeking reliable returns without excessive fees.
Innovator Deepwater Frontier Tech ETF
Exploring Emerging Companies
The Innovator Deepwater Frontier Tech ETF focuses on identifying emerging companies with the potential for breakthrough performances in robotics and AI. Its top holdings feature unconventional players, including controversial gaming companies. While this may introduce higher risk, some investors may find these holdings align with their beliefs and investment preferences.
With a year-to-date return of 18.3% and 113 total holdings, this ETF's performance lags behind others on this list. Its expense ratio is 0.7%, the highest among the top 10 ETFs.
iShares Global Tech ETF
The Apple and Microsoft Dominance
The iShares Global Tech ETF is dominated by Apple and Microsoft, making it a somewhat vanilla option. However, its inclusion of ASML Holdings and Taiwan Semiconductor brings a unique twist. ASML Holdings, known for extreme ultraviolet lithography machines, plays a crucial role in chip manufacturing. With the growing demand for chips and increased chip
production in the US, ASML Holdings is poised for sustained success.
With a year-to-date return of 23.7% across 114 companies and an expense ratio of 0.4%, this ETF strikes a balance between performance and cost-effectiveness.
iShares US Technology ETF
The Foundational ETF for AI
The iShares US Technology ETF serves as a solid foundational ETF for investors seeking exposure to the AI space. With top holdings in Microsoft, Alphabet (Google), Nvidia, and Meta, this ETF covers significant players in the AI landscape. Alphabet's incorporation of AI in various services and Meta's focus on AI-driven social networks offer promising prospects.
This ETF boasts the highest year-to-date return among the top 10, with an impressive 29.3%. It holds 139 companies and has an expense ratio of 0.39%. Additionally, its five-year return of 17.9% showcases its long-term stability.
Seizing the AI Investment Opportunity
Investing in AI through ETFs provides a well-diversified approach to capitalize on the incredible potential of this transformative technology. The top 10 AI ETFs for 2023 offer various investment options, each with its unique strengths and areas of focus.
Whether you prefer the broad scope of the iShares US Tech Breakthrough Multisector ETF or the targeted approach of the Invesco QQQ Trust Series 1 ETF, there's an option to suit your investment goals.
Remember, this list is not exhaustive, and there may be other AI ETFs worthy of consideration. The provided spreadsheet offers a comprehensive overview of the researched funds, allowing you to explore additional options.
Make informed decisions, assess your risk tolerance, and consult with a financial advisor before making any investment choices. The AI revolution is here, and now is the time to seize this once-in-a-lifetime opportunity.
Happy investing! 🙂