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Proprietary Data Insights Top Artificial Intelligence ETF Searches This Month
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The 5 Most Popular AI ETFs In 2024
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The Juice is on record as saying if you want exposure to artificial intelligence (AI), you should start with a solid semiconductor ETF. Because we fully realize some investors want more and broader exposure, today we look at some of the most popular AI ETFs using two different metrics:
Combining these two excellent data sources helps us get a good handle on where it might make sense to go after semiconductors as you aim to profit from the AI explosion. But first, the semiconductor ETF we always suggest first is the VanEck Semiconductor ETF (SMH). If you believe last week’s significant downside in the Nasdaq (down 2% on Friday) and, in particular, Nvidia (NVDA) (down 10% on Friday) was little more than a minor correction, it might be time to gobble up a few SMH shares. SMH was down about 4.5% on Friday. Over the last month, it’s off just under 12% compared to NVDA’s nearly 17% decline. YTD, SMH is up about 18%, while NVDA has popped roughly 58%. And that’s taking Friday’s carnage into account. So you see the deal clearly. Even though NVDA makes up almost 21% of SMH’s portfolio, the ETF held up relatively well on Friday. Most of the other names in SMH’s top ten holdings were down between 2% and 5%. While you don’t get quite the same upside in SMH as you do with NVDA, you don’t get quite as intense downside either. Which is part of the point of investing in ETFs and, before you do, looking under the hood to see which stocks they own. SMH is straightforward. It’s a passive ETF that tracks a broad, 25-stock semiconductor index. ETFs that invest around the theme of artificial intelligence aren’t quite as easy to undress. You need to do what we do frequently in The Juice — dig into the holdings. According to TrackInsight, the AI ETFs it tracks have seen $2.3 billion in inflows (that is cash coming into the fund) so far this year. Excluding crypto, this trounces the second most popular theme, which is nuclear energy at $785 million. Goes without saying, AI is hardly a fad. Like it or not, it’s here to stay. So, depending on your specific circumstances and appetite for risk, it might deserve a place in your portfolio beyond what you get without thinking in, say, SPY, QQQ and SMH. If you scroll to the top of today’s Juice, you’ll see the two AI ETFs investors have been searching for most via Trackstar: the Global X Artificial Intelligence & Technology ETF (AIQ) and the Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ). They sound similar, but there are some key differences between the two. First, size. According to TrackInsight, AIQ has $1.62 billion in assets under management (AUM), making it the second largest pure AI ETF it tracks. BOTZ comes in 10th at $46 million. Both ETFs are passive, tracking AI (and AI-related) indexes created by a firm called Indxx. In terms of holdings, AIQ’s portfolio has 84 stocks, 70% of which are U.S. companies. And the top is a list of tech’s top names, such as NVDA, Meta Platforms (META), Netflix (NFLX), Amazon.com (AMZN), Broadcom (AVGO) and Microsoft (MSFT). AIQ’s top ten holdings make up roughly 32% of the entire portfolio. While AIQ has outperformed SPY and QQQ over some recent timeframes, it has tended to lag SMH (though AIQ has dropped less than SMH in recent days). It also has a somewhat high expense ratio of 0.68% (SMH has a 0.35% expense ratio, SPY, 0.09% and QQQ, 0.20%). For our money, it doesn’t make a lot of sense to buy AIQ when these other alternatives exist. As for BOTZ, while it hasn’t performed as well as SPY, QQQ, SMH or AIQ, it definitely owns a different slate of stocks. The index it tracks is heavy on NVDA (at a 20.9% concentration), but, after that you’re looking at everything from Intuitive Surgical (ISRG) to names most investors probably have never heard of, such as Yaskawa Electric Corp (YASKF) and Pegasystems (PEGA). Just 45% of the portfolio is composed of U.S. companies with 34% coming from Japan and around 11% from Switzerland. BOTZ’s expense ratio is 0.68%. Here again, we ask why? Unless you’re really looking to tune into the types of names BOTZ owns for some reason, why go so far astray when looking to get into AI. Big tech and big semiconductor is where it’s at. And you can get at these companies via quite a few very good, low-cost index ETFs. This isn’t to say you shouldn’t speculate on a strong individual name or even ETF here or there. But it is to say, for as hot as AI is, it’s not all that complicated. The names that have pioneered and will likely, with probably only a few exceptions, continue to lead the industry are the ones to put at the top of your list.
The Bottom Line: It’s something you don’t see much in the abundance of ETF coverage out there. Investors focusing hard on an ETF’s holdings. We explain exactly how to do it in How To Research An ETF. It’s so simple to see the name of an ETF, read the overview, look at past performance and click buy. But, often, there’s a good chance you’ll pay more and take on more risk in a specialized, thematic ETF than you will in a broad market name holding some of the same and many other better companies in and around the AI space. |
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