One of the nifty features of exchange-traded funds (ETFs) and the companies behind these products is that they often move quickly to offer investors access to disruptive and emerging segments of financial markets. While that strategy does not always bear fruit for fund sponsors, it is accurate to say, on at least two accounts, that artificial intelligence and robotics ETFs have been well received by investors.
There are now three such funds available to U.S. investors with the third robotics ETF having debuted on Feb. 22. Various data points confirm the long-term viability of the artificial intelligence and robotics investment themes.
“Worldwide spending on robotics and related services was anticipated to total $97.2 billion in 2017, an increase of 17.9% over 2016,” according to First Trust. “Robotics spending is expected to accelerate over the 2016-2021 forecast period, reaching approximately $230.7 billion in 2021 with an annual growth rate of 22.8%.”
Those are just a sampling of the data points confirming the allure of artificial intelligence and robotics. With that in mind, consider the following robotics ETFs for exposure to this fast-growing part of the investment landscape.
Robotics ETFs to Buy: ROBO Global Robotics & Automation Index ETF (ROBO)
Expense Ratio: 0.95%, or $95 annually per $10,000 invested
The ROBO Global Robotics & Automation Index ETF (NASDAQ:ROBO) is the seasoned veteran of the robotics ETF stable, having come to market in the fourth quarter of 2013.
ROBO has erased any doubts about the viability of robotics investing in the ETF wrapper. Today, the ETF has more than $2.3 billion in assets under management, roughly 10% of which has flowed into the fund just this year.
Last year, while returning 44%, ROBO hauled in $1.5 billion in new assets, according to CFRA Research. ROBO holds 92 stocks, over two-thirds of which are U.S. and Japanese companies. This robotics ETF is also reflective of the widespread uses of artificial intelligence and robotics technologies as highlighted by its exposure to a dozen industries. Those groups include consumer stocks, energy, healthcare, 3D printing and security and surveillance firms.
Proving that there is massive growth potential with mid-cap stocks, over half of ROBO’s roster fits into that cap spectrum. Since its inception, ROBO has turned $10,000 into almost $17,000 and it has done so in surprisingly docile fashion with a standard deviation of just 7.68%.
Robotics ETFs to Buy: Global X Robotics & Artificial Intelligence ETF (BOTZ)
Expense Ratio: 0.68%
The Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ) further proves investors have an appetite for robotics ETFs. BOTZ turns two in September and it is already tussling with ROBO for the honor of largest robotics ETF. This Global X offering tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index.
BOTZ and ROBO are likely to be joined at the hip for a while as, until Feb. 22, they had the robotics ETF market cornered. BOTZ topped ROBO last year.
“BOTZ has more exposure to Japan (50% of assets vs. 27%) and industrials (48% vs. 41%) than ROBO, while providing smaller stakes in the U.S. (28% vs. 42%) and information technology (39% vs. 44%),” said CFRA.
The artificial intelligence exposure offered by BOTZ could be a significant catalyst for the ETF in the years ahead.
“Artificial intelligence (AI) is an essential component to the advancement of robotics technology. AI allows robots to not just execute on human or pre-planned inputs, but also to operate in an unstructured environment and make decisions,” according to Global X.
Robotics ETFs to Buy: First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT)
Expense Ratio: 0.65%
The First Trust Nasdaq Artificial Intelligence and Robotics ETF (NASDAQ:ROBT) is the newest member of the robotics ETF fray. First Trust’s newest ETF tracks the Nasdaq CTA Artificial Intelligence and Robotics Index, which “is designed to track the performance of companies engaged in the artificial intelligence and robotics segment of the technology, industrial, medical and other economic sectors. The Index includes companies in artificial intelligence or robotics that are classified as either enablers, engagers or enhancers,” according to Nasdaq.
The three categories in ROBT are weighted as follows: 60% to engagers, 25% to enablers and 15% to enhancers. Familiar names in this new ETF include Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB) and Nvidia Corporation (NASDAQ:NVDA).
“Worldwide spending on cognitive and AI systems was anticipated to reach $12 billion in 2017, an increase of 59.1% over 2016,” according to First Trust.
Obviously, ROBT is entering a competitive market in the ETF space, but it is, at least for the time being, the least expensive robotics ETF, and its comparatively low fee could help it gain traction with investors.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.