There are three investable AI categories: robotics, machine learning and AI infrastructure.
Robotics includes automation, such as the Tesla autopilot, in addition to industrial and manufacturing machines. Machine learning products autonomously improve and adapt with new data. The most common examples are the digital assistants on our smartphones.
AI infrastructure is the data and cloud services that support automation and machine learning.
Stock investments carry three risks: market risk, sector risk and individual company risk.
Buying a sector ETF eliminates the individual company risk. AI is expanding through many industries, but not all the products and innovations will be profitable.
The broad exposure in a sector ETF provides the opportunity to participate in the sector’s growth without the need to pick the winners and losers.
Robotics is the oldest category of AI. ROBO Global Robotics & Automation Index ETF (ROBO) and Global X Robotics & Artificial Intelligence ETF (BOTZ) are the largest AI ETFs.
ROBO launched in 2013 followed three years later by BOTZ, and both have market caps greater than $1 billion.
There is significant overlap in the top 10 holdings of the ETFs, and both concentrate on robotics and manufacturing.
The primary difference is the number of stocks in each. BOTZ is more concentrated, holding 31 stocks; ROBO currently holds 86 stocks. The market performance of the last three years is similar — a flat overall return in a “W” shaped chart since January 2018.
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT) is a newer and smaller fund ($115 million). ROBT leans more toward information technology than the industrial applications overweight in ROBO and BOTZ.
There is an iShares option too, of course. The iShares Robotics and Artificial Intelligence Multisector ETF (IRBO) invests in “developed and emerging market companies that could benefit from the long-term growth and innovation in robotics technologies and artificial intelligence.”
This two-year-old fund seeks to profit from the beneficiaries of AI innovation rather than the innovators themselves.
A machine-learning ETF
ROBO Global is the company behind three AI ETFs available to U.S. investors. The first is ROBO mentioned above. The second is HTEC.
ROBO Global Healthcare Technology and Innovation ETF (HTEC) is the most concentrated bet among these AI ETFs. HTEC “provides global exposure to companies leading the healthcare technology revolution, across diagnostics, robotics, genomics, precision and regenerative medicine, lab automation, instruments, data analytics and telehealth.”
This is a new ETF that has not yet drawn in significant assets ($29 million). HTEC covers the range of healthcare AI applications from robotics to the machine learning search for better diagnostic outcomes. If AI is the future for healthcare innovations, HTEC covers all aspects.
AI infrastructure ETF
The third ROBO Global fund is the ROBO Global Artificial Intelligence ETF (THNQ). THNQ invests in “companies developing the technology and infrastructure enabling AI, such as computing, data and cloud-services, as well as companies that apply AI in various verticals, from business processes to e-commerce and healthcare.”
This fund opened in May and is closer to the consumer applications of AI than any of the other funds. Included in the top 10 holdings are Amazon, Square, Tesla, Spotify and Tencent Holdings. These companies illustrate the vertical range from AI infrastructure to automation development to consumer products.
The range of ETFs available allows the investor to choose which aspect of AI to target. Place your bet on industrial robotics, information technology, healthcare innovation or consumer-driven applications.