Are The Most Popular Artificial Intelligence ETFs Worth Your Time?

In Monday’s Juice, we looked at one of the hottest areas of ETF investing — artificial intelligence (AI). 

In that installment, we looked inside the two AI ETFs investors have been searching for most across the platforms of our 100+ financial media partners. The Global X Artificial Intelligence & Technology ETF (AIQ) and the Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ). 

Today, we hit up the same Trackstar list (see above) and do some more digging. We like to do this simply because not enough other personal finance and investing sites do this. Even ones that cover ETFs predominantly or exclusively. They break everything down by passive or active, the sector and/or theme and look at performance. 

To effectively research an ETF, you have to look at its holdings and see how they compare to what you can get elsewhere. Often you’ll find that you can get pretty much the same exposure to the same names in a low-cost ETF that tracks a broad market index than you can in a relatively high-cost fund with a fancy name that plays on the hottest trends in investing. In this case, a real trend that’s here to stay — AI. 

But just because AI is real and might deserve a place in your long-term portfolio doesn’t mean you necessarily need to own an AI ETF. 

FIrst, let’s consider the iShares Robotics and Artificial Intelligence ETF (IRBO). It’s the third most searched AI ETF in Trackstar. IRBO is a passive ETF that tracks the NYSE FactSet Global Robotics and Artificial Intelligence Index. It has a middle-of-the-road expense ratio of 0.47%. 

While we wouldn’t necessarily buy IRBO, we actually like it a bit better than some of the other AI ETFs we review. Mainly because of its diverse slate of holdings that are not super overweight any one name. This is not an ETF where Nvidia (NVDA) makes up 20% of the portfolio. 

Instead, MicroStrategy (MSTR) is the top holding at 2.16%, followed by NVDA at 1.71%, Arm Holdings (ARM) at 1.55%, Spotify (SPOT) at 1.51% and Meta Platforms (META) at 1.47%. 

This is basically a super broad tech ETF with some players deep in AI and others more on the fringes. 

The fourth most popular AI ETF in Trackstar pops up a lot lately. The Defiance Quantum ETF (QTUM). QTUM’s expense ratio is a decent (but not low) 0.40%. 

We’ll let Defiance ETFs tell you about QTUM: 

QTUM provides exposure to companies on the forefront of machine learning, quantum computing, cloud computing, and other transformative computing technologies.

The underlying index of this quantum computing and machine learning ETF is called the BlueStar Quantum Computing and Machine Learning Index (BQTUM). It tracks approximately 71 globally-listed stocks across all market capitalizations.

The BlueStar Quantum Computing and Machine Learning Index is a rules-based index comprised of equity securities of leading global companies engaged in the research & development or commercialization of systems and materials used in quantum computing: advanced traditional computing hardware, high powered computing data connectivity solutions and cooling systems, and companies that specialize in the perception, collection and management of heterogeneous big data used in machine learning.

This is one of those passive ETFs that follows an index that’s quite like the standard indices we often think of. The S&P 500 or Nasdaq 100. The main rule here is that the companies included in the index must meet size and trading volume specifications and derive at least half of their revenue from the abovementioned AI-related areas. 

An equal-weight ETF, the top holding by just a sliver is, like IRBO, MicroStrategy followed by Nvidia. From there, QTUM diverges and includes names such as Advanced Micro Devices (AMD), Alphabet (GOOGL), Nokia (NOK) and IBM (IBM). 

Here again, if you own SPY, QQQ, SMH and maybe a passive technology-focused ETF, you’re covered. You don’t need to go the thematic route to get at AI. 

Sort of a similar story for the fifth most searched name, the First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT). We don’t like the 0.65% expense ratio. And while we think the portfolio is different from what you normally see in these types of ETFs, we ask ourselves why would you own these stocks at all instead of or in addition to the market leaders we talk about all of the time? 

While big players such as AMD, NVDA and Microsoft (MSFT) are part of ROBT, there are too many other lesser-known names that are part of the index ROBT tracks and therefore mimics. 

Do you really need to be in stocks such as Mobileye Global (MBLY), which is down more than 30% over the last year or BlackBerry (BB), which is off about 35% over the same time period?  

You don’t need to answer that question. 

The Bottom Line: One day we might come across an AI ETF that impresses us. For now, we’ll keep it simple. 

Own SPY, QQQ, SMH alongside maybe a tech and dividend ETF. If you really love AI, find some solid individual names to supplement with. Legacy tech names, semiconductor stocks and some more speculative tickers. 

AI isn’t clean energy. As big as the space is, the pioneers and subsequent leaders are the companies that have been leading the stock market for years.

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