It remains to be seen just how durable this year’s growth stock rebound will be, but one thing is clear: There’s obvious momentum for the artificial intelligence (AI) investing theme.
Consider some of the very recent headlines. Last week, Google parent Alphabet (GOOG) said it will invest $300 million in a company known as Anthropic, which is a rival to OpenAI. Anthropic makes the Claude chatbot, a competitor to OpenAI’s famed ChatGPT.
Speaking of ChatGPT and OpenAI, it’s rumored that Microsoft (MSFT) is readying an investment of up to $10 billion in that company. That after the software giant allocated $1 billion to OpenAI in 2019 and another $2 billion two years later.
Enthusiasm for ChatGPT is having a positive effect on a slew of other AI equities as highlighted by the fact that the Nasdaq CTA Artificial Intelligence and Robotics Index is higher by 19.60% year-to-date, or more than double the returns posted by the S&P 500. With that in mind, it’s not surprising that some investors are considering revisiting AI ETFs. Here are a few to evaluate.
ARK Autonomous Technology & Robotics ETF (ARKQ)
The ARK Autonomous Technology & Robotics ETF (ARKQ) is an entrenched force in the AI ETF arena and it’s strutting its stuff this year as evidenced by a 24.36% gain. That’s testament to the advantages of active management in disruptive technology industries, of which AI and robotics certainly are two.
Being an active fund, ARKQ offers investors flexibility, meaning it can key on industries that are AI-intensive, including 3D printing, automation and robotics, autonomous transportation and space exploration, among others. That flexibility is meaningful in another way in that ARKQ doesn’t need to rely on speculative stocks to drive returns. In fact, its roster features some familiar names such as Tesla (TSLA), Deere (DE), Caterpillar (CAT) and Alphabet.
As ARK points out in its 2023 Big Ideas report, the intersection of autonomous transportation and logistics, which will be drive in large part by AI, has an attractive runway for growth.
“Based on our updated assumptions on pricing, ARK estimates that autonomous logistics revenue could scale from nearly zero today to $1-2 trillion by 2030,” notes ARKQ’s issuer. “Autonomous delivery charges could range from $0.20 to $10 per trip.”
Robo Global Robotics and Automation Index ETF (ROBO)
One of the godfathers of the AI ETF group, the Robo Global Robotics and Automation Index ETF (ROBO) is setting a nice pace to start 2023 with a gain of nearly 18%. The $1.38 billion ETF turns 10 years old in October and “invests in global companies that are driving transformative innovations in robotics, automation and artificial intelligence (RAAI), including companies that create technology to enable truly intelligent systems that can sense, process and act, and companies that apply those technologies to deliver RAAI-enabled products—including robots—to businesses and consumers,” according to the issuer.
ROBO’s portfolio is well-balanced as none of its 80 holdings exceed a weight of 2.08%, confirming single stock risk is relatively benign in this AI ETF.
ROBO offers other benefits, including the size factor and geographic diversity. Sixty-percent of its holdings are classified as mid- and small-caps and 58% of its components are not US-based firms.
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT)
The First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT) follows the aforementioned Nasdaq CTA Artificial Intelligence and Robotics Index, which is one of the more compelling benchmarks tied to AI.
The Nasdaq CTA Artificial Intelligence and Robotics Index focuses on three types of companies: Enablers, engagers and enhancers. Enablers are considered to be firms providing foundational pieces in the AI and robotics equations while engagers “design, create, integrate or deliver robotics and/or AI in the form of products, software or systems,” according to the index provider.
Enhancers aren’t core AI names, but they provide value add services throughout the industry. The $210 million ROBT holds 111 stocks with a median market capitalization of $15.93 billion, indicating this AI ETF isn’t heavily on large- and mega-cap names to drive performance.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
