Artificial Intelligence is likely to be the hottest market available to investors right now, with its volume estimated at more than $243 billion this year, and is expected to… More than triple by 2030. However, as a booming industry, AI is populated by both technology pioneers using their heft to influence the space and smaller, more agile newcomers racing to advance the underlying technologies. It is also, unfortunately, home to a large number of companies trying to capitalize on the rapid rise of AI in general without necessarily contributing much to the industry.
For investors, AI represents a massive opportunity but also a challenge – how does one identify the best bullish AI stocks that have yet to reach their full potential? With many investors warning of the possibility of an AI bubble similar to the dot-com boom about 25 years ago, the reward and risk are equally high.
For investors looking to hedge their bets through diversification, exchange-traded funds (ETFs) can represent a good opportunity. These could include funds that focus specifically on AI companies, such as the Global X Robotics & Artificial Intelligence ETF Nasdaq: Putzas well as those related to the broader technology sector, such as the iShares Expanded Tech Sector ETF NYSEARCA: IGMor to a critical component used in AI applications, such as the Direxion Daily Semiconductor Bull 3x Shares ETF NYSEARCA: Soxl.
Global X Robotics & Artificial Intelligence ETF: Target Portfolio vs. Price
GlobalX Robotics & AI Thematic ETF today
GlobalX Robotics and Artificial Intelligence ETF
As of 01/17/2025 at 04:00 PM ET
- 52 week range
- $26.60
▼
$34.26
- Dividend yield
- 0.12%
- Assets under management
- $2.62 billion
BOTZ is one of a growing number of ETFs that focus specifically on artificial intelligence and robotics companies. Relative to its $2.6 billion asset base, it has a fairly strong one-month average trading volume in the mid-600,000 range as of January 15, 2025. BOTZ is a focused fund, with fewer than 50 holdings, although with the exception of three or four major players occupying 10% or more of the portfolio each, the assets are distributed fairly evenly across the other names.
This fund will mostly appeal to investors looking for possible diversification when looking at AI and robotics names, meaning some companies are not active participants in the AI space. Focusing on niche areas comes with fairly high fees, with BOTZ having an expense ratio of 0.68%.
iShares Expanded Technology Sector ETF: Strong performance and broad exposure
iShares Expand Technology Sector ETF today
iShares Technology Expanded Sector ETF
As of 01/17/2025 at 04:10 PM ET
- 52 week range
- $75.66
▼
$107.19
- Dividend yield
- 1.77%
- Assets under management
- $5.85 billion
IGM’s nearly 300 holdings make it a broad-based technology fund — although it’s not focused on AI, many of the companies represented in its portfolio are involved in AI. The fund’s $5.7 billion in assets reflects its broad appeal, and its 0.41% fee is fairly competitive, especially against funds dedicated to artificial intelligence.
As of January 15, 2025, it has a one-year track record of 36.8%, slightly outperforming the broader market. One thing investors might take into consideration is that IGM holds it All the major players in technology like Apple Inc. Nasdaq: Apple And Microsoft. Nasdaq: MSFT mainlysometimes by fairly large proportions of assets invested, meaning that investors who own shares in those companies individually may inadvertently skew the balance of their portfolios.
Direxion Daily Semiconductor Bull 3x Shares ETF: Leverage Play for Compounding Returns
Direxion Daily Semiconductors Bull Shares 3x Today
Direxion Daily Semiconductors Bull Shares 3x
As of 01/17/2025 at 04:10 PM ET
- 52 week range
- $23.50
▼
$70.08
- Dividend yield
- 0.31%
- Assets under management
- $10.10 billion
SOXL is another fund that does not specifically focus on AI companies but is closely linked to the industry.
By offering 3x long exposure to an index of semiconductor stocks, this fund provides increased opportunity to amplify daily returns when the semiconductor space is performing well.
Semiconductors have boomed thanks to strong demand from artificial intelligence and other areas of technology. However, the use of leverage means that active traders best use this fund with a high tolerance for risk.
Beware of the name AI
As funds like IGM and SOXL show, it is possible to get strong exposure to a broad swath of the AI space without investing in an ETF explicitly named after the AI industry. Just as there are companies seeking to attract investors by referencing artificial intelligence in their names and materials without actually innovating, so too are there ETFs aiming to capitalize on this trend. Look at a potential AI fund’s holdings and compare them to traditional technology-focused funds like the Technology Select Sector SPDR Fund NYSEARCA:XLK-If there is significant overlap, it may be possible to achieve similar AI exposure through a general fund with a lower expense ratio.
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