In this article, we will take a look at the 11 best AI ETFs to invest in 2023. To see more such ETFs, go directly to 5 Best AI ETFs to Invest In 2023.
The stock market is all about AI these days. Investors, venture capitalists and investment funds are pouring money into AI companies. Nvidia’s latest rally, which saw the company gaining a whopping $190 billion in market value in a single day, is a case in point that shows how a very few players are benefitting from the latest AI-driven rally. Big seven tech companies — Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META), NVIDIA Corporation (NASDAQ:NVDA) and Tesla Inc. (NASDAQ:TSLA) — added a combined $454 billion in value in just five days. This huge concentration of gains have made some analysts uneasy as they think this lack of breadth in the market could backfire.
Valuation Worries Return
Bloomberg in a recent report quoted Michael Mullaney, director of global research for Boston Partners, who warned about high valuations and expectations, something the market has paid a steep price for in the past.
“These are good companies. They’re not going bankrupt. But people are starting to pay exorbitant prices for them. It feels frenzy-ish. If the leadership was all crappy companies like we saw in 2000, it would be game over very shortly", Mullaney said.
Similarly, The Wall Street Journal quoted Andy Constan, chief executive officer of Damped Spring Advisors, who thinks that if overall economic productivity doesn’t rise to match these AI-driven gains in stock prices, it could lead to losses.
“The overall economy is not rising at the gains these stock prices represent. That makes me worried for the valuations.”
Why Did Cathie Wood Sell NVIDIA Corporation (NASDAQ:NVDA) ?
Cathie Wood, one of the biggest proponents of AI and the innovation brought about in the world due to this technology, recently talked to Bloomberg. Asked why she sold NVIDIA Corporation (NASDAQ:NVDA) and how she feels about missing the big rally the company saw recently, the 67-year-old manager of ARK Investment said her fund bought Nvidia in the last quarter of 2022 and since then the stock tripled until it sold the stock.
Wood said her fund looks at relative valuations in the AI sector and piled into some other stocks that are poised to benefit from the AI industry. Wood added that NVIDIA Corporation (NASDAQ:NVDA) is trading at 25 times sales while Tesla Inc. (NASDAQ:TSLA), which she thinks is “probably the biggest AI stock out there,” is six times sales. Wood also mentioned UiPath and called it a “beautiful” AI play and highlighted that the company too trades as six times sales.
NVIDIA Corporation (NASDAQ:NVDA)'s Challenges?
Cathie Wood also mentioned some challenges NVIDIA Corporation (NASDAQ:NVDA) could face in the future. She said that the cyclicality of the semiconductor industry could pose a risk to NVIDIA Corporation (NASDAQ:NVDA). Similarly, increased competition fueled by major companies like Tesla Inc. (NASDAQ:TSLA), Meta Platforms, Inc. (NASDAQ:META)and Alphabet Inc. (NASDAQ:GOOG) coming up with their own chips for large language models could also affect the demand.
Asked whether she received any negative feedback from investors on selling NVIDIA Corporation (NASDAQ:NVDA) too early, Wood said she hasn’t received much pushback from investors and emphasized that her fund is “on AI” but in a "differentiated" way. Wood added that her fund is looking for those AI companies which have “vision” from the “management” point of view, proprietary data and AI expertise.
Investing in thematic ETFs is perhaps the best way to gain from a market trend. This year has seen a dramatic rise in AI-based ETFs. Data from Bloomberg shows that 14 US-based ETFs which have “artificial intelligence” in their fund descriptions saw a whopping $338 million in inflows this year
For this article, we scoured important ETF offerings available in the market today and picked 11 ETFs that give exposure to companies that are directly or indirectly involved in the development of AI software, hardware, and services. Some notable stocks these ETFs give exposure to include NVIDIA Corporation (NASDAQ:NVDA), Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:META) and Microsoft Corporation (NASDAQ:MSFT).
Best AI ETFs to Invest In 2023
11. Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ)
Robotics and AI is a match made in heaven for investors since the penetration of AI software will automatically give rise to AI-focused robotics products. The Robotics & Artificial Intelligence ETF by Global X invests in companies that can benefit from the expansion of AI and robotics in industrial robotics and automation, non-industrial robots, and autonomous vehicles domains. The ETF seeks to track the performance of Indxx Global Robotics & Artificial Intelligence Thematic Index.
Some of the notable holdings of the ETF include NVIDIA Corporation (NASDAQ:NVDA), Intuitive Surgical, Inc. (NASDAQ:ISRG) and Keyence Corporation (OTC:KYCCF).
Keyence Corporation (OTC:KYCCF) is an interesting company that largely remains under the radar. The Japanese company makes automation sensors, vision systems, barcode readers, laser markers, measuring instruments, and digital microscopes. Keyence Corporation (OTC:KYCCF) has gained about 27% year to date.
10. First Trust Nasdaq Artificial Intelligence and Robotics ETF (NASDAQ:ROBT)
First Trust Nasdaq Artificial Intelligence and Robotics ETF (NASDAQ:ROBT) seeks to track the Nasdaq CTA Artificial Intelligence and Robotics IndexSM, which has exposure to companies engaged in artificial intelligence ("AI") and robotics. The ETF’s portfolio consists of 107 stocks as of May 29. Some notable names in the portfolio include C3.ai, Inc. (NYSE:AI) , Palo Alto Networks Inc. (NYSE:PANW) and ServiceNow Inc. (NYSE:NOW). These companies stand to benefit from the AI boom.
C3.ai, Inc. (NYSE:AI) has already gained about 197% year to date through May 29. C3.ai, Inc. (NYSE:AI) jumped about 11% after the company posted preliminary Q4 results, which show that its revenue in the period was between $72.1 million and $72.4 million, much better than the Street’s estimate of $71.1 million.
9. iShares Robotics and Artificial Intelligence Multisector ETF (NYSE:IRBO)
IRBO is another ETF that gives investors exposure to both AI and robotics. The fund seeks to track an index composed of developed and emerging market companies that stand to benefit from innovation in AI, robotics and related technologies. The ETF’s prospectus says that it’s seeking growth with companies that can “shape the global economic future.”
Some of the biggest holdings of this ETF include NVIDIA Corporation (NASDAQ:NVDA), Meta Platforms, Inc. (NASDAQ:META) and Spotify Technology S.A. (NYSE:SPOT).
Currently, NVIDIA Corporation (NASDAQ:NVDA) is perhaps the hottest AI stock amid the company’s spectacular first quarter results and strong guidance driven by a huge demand of its chips that are required to power AI apps like ChatGPT. And NVIDIA Corporation (NASDAQ:NVDA) keeps coming up with more AI-related announcements. On May 29, NVIDIA Corporation (NASDAQ:NVDA) launched networking platform to improve the performance of Ethernet-based AI clouds. NVIDIA Corporation (NASDAQ:NVDA) is also partnering with marketing firm WPP to build a generative AI-enabled content engine for digital advertising.
8. Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ)
Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) invests in companies that invest and benefit from artificial intelligence (AI) through their products and services. Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) gives investors exposure to software, hardware and Big Data-related facets of the AI markets. Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) seeks to track the Indxx Artificial Intelligence & Big Data Index. Some of the most important holdings of this ETF include Microsoft Corporation (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:META) and Tesla Inc. (NASDAQ:TSLA).
Microsoft Corporation (NASDAQ:MSFT) is perhaps the most obvious name to invest in for any investor seeking to gain from the AI advances since Microsoft is one of the companies spearheading the AI product launches and innovation. Bernstein analyst Mark Moerdler recently gave bullish comments for Microsoft Corporation (NASDAQ:MSFT) after attending the company’s Build conference. The analyst, who has an Outperform rating on the stock, said Microsoft Corporation (NASDAQ:MSFT) plans to integrate AI in every facet of its business and it has the potential to benefit from this integration given its huge user base that comes courtesy of Office, Windows and other products and suites.
Microsoft Corporation (NASDAQ:MSFT) is also the most popular stock among the 943 hedge funds tracked by Insider Monkey as of the end of the first quarter.
7. SPDR S&P Kensho New Economies Composite ETF (NYSE:KOMP)
While not a pure-play AI ETF, SPDR S&P Kensho New Economies Composite ETF (NYSE:KOMP) seeks gains from the “new economy” that is fueled by companies focused on disruptive technologies like AI, robotics and automation. SPDR S&P Kensho New Economies Composite ETF (NYSE:KOMP) is one of the best ETFs to play the technology boom that is quickly changing multiple facets of human civilization.
The ETF seeks to track the performance of S&P Kensho New Economies Composite Index.
Taking a look at the fund’s top holdings shows how diversified its holdings are. Instead of just focusing on obvious AI names like Microsoft Corporation (NASDAQ:MSFT) and Meta Platforms, Inc. (NASDAQ:META), SPDR S&P Kensho New Economies Composite ETF (NYSE:KOMP) is tapping into smaller players that have a lot of growth potential from the new technologies. The fund’s top holdings include Bruker Corporation (NASDAQ:BRKR), Teledyne Technologies Incorporated (NYSE:TDY) and Liquidia Corporation (NASDAQ:LQDA).
Bruker Corporation (NASDAQ:BRKR) is a Massachusetts-based company that makes scientific instruments for molecular and materials research. Bruker Corporation (NASDAQ:BRKR) is using AI technologies in key product and research advances including the use of AI in nuclear magnetic resonance.
6. WisdomTree Artificial Intelligence and Innovation Fund (CBOE:WTAI)
WisdomTree Artificial Intelligence and Innovation Fund (CBOE:WTAI) tracks the performance of the WisdomTree Artificial Intelligence & Innovation Index, which gains exposure to companies involved in the use of AI technologies and contributing to the development and deployment of AI innovation.
The top three holdings of WisdomTree Artificial Intelligence and Innovation Fund (CBOE:WTAI) are NVIDIA Corporation (NASDAQ:NVDA), Meta Platforms, Inc. (NASDAQ:META), and little-known Alchip Technologies Ltd.
Alchip Technologies Ltd. is a Taiwan-based semiconductor company working in the SoC design domain. Alchip Technologies Ltd. also works with TSMC to provide SoC design and has customers in AI, HPC/supercomputer, mobile phones, entertainment devices and related industries.
