Artificial Intelligence

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>>> Best AI ETFs for Q1 2022

ROBO, ROBT, and KOMP are the best AI ETFs for Q1 2022


Investopedia

By NATHAN REIFF

December 21, 2021


https://www.investopedia.com/investing/top-etfs-capitalizing-artificial-intelligence/?utm_campaign=quote-yahoo&utm_source=yahoo&utm_medium=referral


Artificial intelligence (AI) exchange-traded funds (ETFs) seek to provide exposure to a fast-growing segment of the technology industry. AI aims to simulate human intelligence, leveraging powerful algorithms to make machines think and act like human beings. Though the automation of repetitive tasks and substitution of human labor by machines is nothing new, AI is accelerating this trend, resulting in giant leaps in productivity.

For investors who are optimistic about AI’s growth potential but unsure about which companies will perform best, an AI ETF is an option. AI ETFs hold a basket of stocks in companies that are engaged in some aspect of AI, enabling investors to share in the growth of AI companies’ profits without the challenge of trying to separate the winners from the losers.

KEY TAKEAWAYS

The artificial intelligence (AI) sector, as represented by the technology sector, outperformed the broader market over the past year.

The AI exchange-traded funds (ETFs) with the best one-year trailing total returns are ROBO, ROBT, and KOMP.

The top holdings of these ETFs are iRhythm Technologies Inc., Ambarella Inc., and Bruker Corp., respectively.

A special note: Some ETFs that use AI as a tool for picking stocks are also sometimes referred to as AI ETFs. But this story focuses on ETFs targeting companies that use AI for other industries, such as robotics, automation, healthcare, and automobiles.

There are six distinct AI ETFs that trade in the United States, excluding inverse and leveraged funds as well as those with less than $50 million in assets under management (AUM). The AI sector does not have its own benchmark, but its performance is best reflected in the index for the technology sector: the S&P 500 Information Technology sector index.

The information technology (IT) index has outperformed the broader market with a total return of 38.8% over the past 12 months, above the S&P 500’s total return of 28.9%, as of Dec. 9, 2021.1 The best-performing AI ETF, based on performance over the past year, is the ROBO Global Robotics and Automation Index ETF (ROBO).

We examine the three best AI ETFs below. All data in the lists below is as of Dec. 9, 2021.2


ROBO Global Robotics & Automation Index ETF (ROBO)

Performance Over One-Year: 19.4%
Expense Ratio: 0.95%
Annual Dividend Yield: 0.17%
Three-Month Average Daily Volume: 89,414
Assets Under Management: $2.0 billion
Inception Date: Oct. 22, 2013
Issuer: Exchange Traded Concepts

ROBO seeks to track the ROBO Global Robotics & Automation Index, which gauges the performance of companies engaged in robotics, automation, and AI.3 The ETF provides exposure to companies developing intelligent systems technology capable of sensing, processing, and acting, as well as to companies that apply that technology.4

The ETF follows a blended strategy of investing in a mix of value and growth stocks. It is diversified across a range of market capitalizations and developed markets.

The fund's top three holdings are iRhythm Technologies Inc. (IRTC), a digital healthcare company; Azenta Inc. (AZTA), a provider of automation, vacuum, and instrumentation equipment; and Teradyne Inc. (TER), an automatic test equipment designer and manufacturer.5


First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT)

Performance Over One-Year: 14.8%
Expense Ratio: 0.65%
Annual Dividend Yield: 0.15%
Three-Month Average Daily Volume: 20,446
Assets Under Management: $294.6 million
Inception Date: Feb. 21, 2018
Issuer: First Trust

ROBT tracks the Nasdaq CTA Artificial Intelligence and Robotics Index, an index composed of companies engaged in the AI and robotics segments of the technology, industrial and other economic sectors. Companies must be classified as AI or robotics engagers, enablers, or enhancers by the Consumer Technology Association to be included, and must meet market capitalization, free float, and trading volume minimums.

The fund’s portfolio is broadly diversified geographically, with U.S. stocks accounting for the largest portion at just under 50%. Japan has the next largest portion of invested assets, followed by the United Kingdom, France, and several other countries.6

The top holdings of ROBT include Ambarella Inc. (AMBA), a fabless semiconductor design company; PKSHA Technology Inc. (3993:TKS), a Japan-based algorithmic license business; and Ciena Corp. (CIEN), a telecommunications networking equipment and software services supplier.7


SPDR S&P Kensho New Economies Composite ETF (KOMP)

Performance Over One-Year: 14.0%
Expense Ratio: 0.20%
Annual Dividend Yield: 1.03%
Three-Month Average Daily Volume: 115,588
Assets Under Management: $2.1 billion
Inception Date: Oct. 22, 2018
Issuer: State Street

KOMP is a multi-cap, blended fund tracking the S&P Kensho New Economies Composite Index. The index is composed of companies that leverage advancements in exponential processing power, AI, robotics, and automation.

The fund holds stocks domiciled in both developed and emerging markets. Semiconductor, application software, and aerospace and defense stocks make up the three largest portions of the portfolio.8

The top holdings of KOMP include Bruker Corp. (BRKR), a maker of scientific instruments for molecular and materials research; Teledyne Technologies Inc. (TDY), a maker of aerospace and defense electronics, digital imaging, and related solutions; and Avis Budget Group Inc. (CAR), a parent company of rental car businesses.9

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