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Proprietary Data Insights Financial Pros AI ETF Searches in the Last Month
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ETFs |
This AI Investment May Not Be Your Best Bet |
OpenAI’s ChatGPT has caused a whirlwind of excitement. At the end of 2022, the Star Trek-level AI platform amassed 1 million users in just five days. But OpenAI isn’t publicly traded. So instead, investors jumped into whatever AI stocks they could find. That’s according to our proprietary Trackstar search database. Retail searches for AI-related names surged roughly 50% across the board, from large-cap behemoths to micro-cap ants. The excitement has spilled over into the ETF sector, as AI-related ETFs are becoming a widely popular search for financial pros. The iShares Robotics and Artificial Intelligence Multisector ETF (IRBO) is their top search out of AI-related ETFs. It’s up a whopping 24.8% year to date. But you may not want to jump into this ETF just yet… iShares Robotics and Artificial Intelligence Multisector ETF IRBO tracks the investment results of an index of companies that benefit from long-term growth and innovation in robotics technologies and artificial intelligence. It offers investors low-cost access to a diversified group of stocks across the robotics and AI value chain. Key Facts About IRBO
There are 119 stocks in the IRBO portfolio. The top 10 assets make up approximately 11.6% of its weight. Source: iShares Stocks in the IT sector make up more than 54% of the portfolio, followed by 20.1% in the communications sector. Source: iShares Performance With so much buzz around AI in 2023, it’s no surprise IRBO is outperforming the red-hot Nasdaq, up 24.8% vs. 17.0% as of February 2. The ETF has been trading since June 26, 2018. As of December 31, 2022, it has a cumulative return of 12.6% since inception. Source: iShares Trading & Investing in IRBO IRBO is thinly traded, with a daily average trading volume of 48,690 shares. Options are available, but those are also thinly traded. The ETF offers an annual dividend of $0.19, yielding approximately 0.6%. Competition If you want exposure to the AI sector in your portfolio, you have some other options. They include the Global X Robotics & Artificial Intelligence ETF (BOTZ), AI Powered Equity ETF (AIEQ), ARK Autonomous Technology & Robotics ETF (ARKQ), and First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT). Portfolio Composition
IRBO has 119 positions in its portfolio, notably larger than BOTZ at 50 and ARKQ at 40, but smaller than AIEQ at 144. IRBO has the same number of positions as ROBT. BOTZ has the most concentrated portfolio of the group. Its top 10 assets comprise 67.3% of its portfolio. ARKQ is close at 63.8%. IRBO is the most diversified in terms of risk. Its top 10 assets comprise 11.6% of its portfolio, while ROBT’s comprise 23.1% and AIEQ’s comprise 27.2%. Fees
IRBO charges an expense ratio of 0.47%, which is reasonable considering its specificity. It’s the cheapest ETF of the group, followed by ROBT at 0.65%, BOTZ at 0.68%, AIEQ at 0.75%, and ARKQ at 0.75%. Dividend Yield
Investors seeking income probably aren’t looking at AI ETFs. But if they are, their best option is ARKQ at 1.24%. Three-Year Cumulative Performance
Of this list, the best returns over the last three years have been from ARKQ at 34.9%, followed by ROBT at 24.0%, IRBO at 23.6%, AIEQ at 18.8%, and BOTZ at 17.3%. But you could have done better buying the Invesco QQQ Trust (QQQ), which returned 45.1% over the same period. Our Opinion 4/10 IRBO is a growth ETF specializing in AI-related companies. But it doesn’t include some of the biggest companies in the space, like Google, Microsoft, IBM, C3.ai, and Meta Platforms. Moreover, the ETF has underperformed the Nasdaq over the last three years. If you’re seeking exposure to the AI sector, we believe it’s better to go with the QQQ instead. It includes the biggest players in the space, is highly liquid, and has a better track record over the long term. |
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