Thanks to companies like Nvidia (NASDAQ:NVDA), artificial intelligence ETFs have become in high demand by investors seeking to ride the tech industry’s most significant trend of 2024.
Like most thematic ETFs, just because AI appears in the name of the ETF doesn’t mean it will hold the stocks you expect it to.
“Knowing what you own, whether it’s one single stock or a pool of assets, is extremely important,” Barron’s reported comments from Jared Woodard, head of ETF strategy at BofA Securities. “The same principle applies as much with artificial intelligence as anywhere else.”
How many AI ETFs are there? VettaFi has listed 40. Of those, 14 have the words “artificial intelligence” in the fund’s name. The remainder are tech funds with AI stocks sprinkled throughout the holdings.
Global X has two with AI in the name of the fund and plenty more that revolve around AI and machine learning technology. Here are three AI ETFs to buy now.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
The largest of the three AI ETFs in net assets is the Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ), with $2.62 billion. It is the second largest thematic ETF at Global X, trailing only the U.S. Infrastructure Development ETF (BATS:PAVE) with $6.38 billion.
BOTZ tracks the performance of the Indxx Global Robotics and Artificial Intelligence Thematic Index, a collection of companies that stand to benefit from the adoption of robotics and artificial intelligence.
Since September 2016, it has gathered a respectable $2.62 billion in assets. The top three Holdings by weight are Nvidia, Intuitive Surgical (NASDAQ:ISRG), and ABB (NYSE:ABB). The trio account for nearly 40% of the holdings, with the other 39 accounting for 60%.
Investing in BOTZ gives you excellent exposure to Nvidia while diversifying your AI bets for the long haul. Charging 0.69%, it’s not cheap by any means. Thematic investing rarely is.
Global X Artificial Intelligence & Technology ETF (AIQ)
The second Global X ETF with AI right in the name of the fund is the Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ), with net assets of $1.33 billion.
It tracks the performance of the Indxx Artificial Intelligence & Big Data Index, a collection of AI-related stocks that use AI to analyze big data. So, whereas BOTZ revolves around AI and the use of robotics, AIQ is about AI and big data.
Although smaller by net assets, it has more than double the number of holdings as BOTZ does, at 85. The top three countries by weight are the U.S. (70.4%), China (7.2%), and South Korea (4.2%). The top three industries by weight are packaged software (22.2%), internet software/services (16.8%), and information technology services (16.2%).
The typical stock held by the ETF has a weighted average market cap of $523.45 billion, a P/E ratio of 30.4, and a P/B ratio of 4.75.
Global X has this to say about AI and data:
“Generative AI models need access to high-quality, real-time, and proprietary data to fulfill their vast potential. The public and private sector buildout of the data management and infrastructure platforms needed to make that happen positions the companies selling the cloud infrastructure, storage hardware, databases, data warehouses, data streaming tools, and more to benefit,” Global X’s Feb. 24 article on AIQ’s website states.”
Global X Cloud Computing ETF (CLOU)
Directly related to AI is the Global X Cloud Computing ETF (NASDAQ:CLOU), which tracks the performance of the Indxx Global Cloud Computing Index, a collection of companies that will benefit from the increased adoption of cloud computing technology.
Launched in April 2019, the ETF has gathered nearly $627 million in net assets. Those assets are invested across 36 stocks, with the top 10 accounting for 41% of the portfolio.
Where AI and cloud computing come together is through generative AI.
“Spending on cloud computing is expected to increase by nearly 22% in 2023, and we expect that cloud software and infrastructure giants can capitalize on this trend by offering AI-incorporated solutions to customers,” Global X wrote in October 2023.
“The growing use of AI-as-a-service is also an opportunity for cloud computing companies to incrementally monetize their offerings by upselling additional cloud infrastructure and services.”
Between 2023 and 2025, end-user spending on the public cloud is expected to grow by 50% to $900 billion, from $600 billion in 2023.
The U.S. accounts for nearly 87% of the ETF’s net assets, with Israel (5%) and Canada (4.4%) being the next two highest weights by country.
CLOU is up 53.8% since its inception nearly four years ago.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
