Strategic AI Investment: 3 ETFs for Prudent Exposure to Smart AI Technologies

August 26, 2024

The rush to invest in Artificial Intelligence (AI) is on, but many Exchange Traded Funds (ETFs) aiming to capitalize on this technological revolution are heavily concentrated in a small number of large companies. this creates potential risks for investors seeking broader exposure to the rapidly evolving AI landscape. Several specialized ETFs are emerging that present a more diversified path for participation in the growth of AI.

The Concentration Risk in Popular AI ETFs

Currently, a significant portion of assets in some popular AI-focused ETFs are allocated to just a few dominant players. As an example,NVIDIA frequently represents a significant portion-around 17% in some broad technology ETFs and nearly 12% in the Global X Robotics & Artificial Intelligence ETF-of the total portfolio.While these companies are undeniably leaders, a concentrated approach may limit potential gains from emerging innovators and increase vulnerability to sector-specific downturns.

Three ETFs Offering Diversified AI Exposure

Investors desiring a wider net to capture gains from a broader spectrum of AI companies have several options. Three ETFs currently stand out for their varied approaches to the AI investment space: the ROBT, the ARTY, and the THNQ. Each offers distinct strengths and portfolio compositions.

ROBT: A Broad Approach to Robotics and Automation

The ROBT ETF targets companies involved in Artificial Intelligence, Robotics, and Automation. The fund classifies companies as ‘enablers’, ‘engagers’, or ‘enhancers’ of these technologies, as defined by the Consumer Technology Association (CTA). This results in a portfolio of over 100 holdings, emphasizing companies actively designing, building, or facilitating AI and robotic systems. As of mid-August 2024, its largest holding, a robotics warehouse automation firm, constituted only 2.4% of the fund’s assets.

Year-to-date (YTD) as of August 26,2024,ROBT has delivered a return of 9.7%, surpassing both the S&P 500 and the performance of the “Grand Seven” stocks.The fund’s expense ratio stands at 0.65%.

ARTY: Focusing on the Future of AI and Tech

The iShares Future AI & Tech ETF (ARTY) adopts a different methodology, tracking the Morningstar Global Artificial Intelligence Select Index.This index focuses on companies currently pivotal to-or expected to become pivotal to-the growth of generative AI, AI data infrastructure, AI software, and AI services. ARTY’s portfolio comprises approximately 50 holdings, with the largest representing roughly 5.9% of assets. The top holdings include lesser-known companies and a Japanese semiconductor component manufacturer.

ARTY boasts higher assets under management and trading volume than ROBT, minimizing potential liquidity concerns. Its expense ratio is a competitive 0.47%. YTD, ARTY has generated a return of 11.4%, possibly offering a compelling performance case for investors.

THNQ: An International Perspective

The THNQ ETF distinguishes itself with a global perspective, including companies enabling AI through computing, data, and cloud services, as well as firms applying the technology across diverse sectors. With 55 stocks representing developed markets, THNQ provides international exposure. The largest position in the fund accounts for approximately 3.3% of the portfolio, incorporating both established names like NVIDIA and lesser-known AI companies.

This diversified approach has proven successful, yielding the highest YTD return among the three ETFs evaluated: 14.5% as of August 26, 2024. Investors will incur a slightly higher fee of 0.68%, still competitive compared to actively managed funds.

ETF Ticker	Expense Ratio	YTD Return (as of Aug 26, 2024)	Number of Holdings
ROBT	0.65%	9.7%	100+
ARTY	0.47%	11.4%	~50
THNQ	0.68%	14.5%	55

Did You Know? The AI ETF market is still young, and fund strategies are constantly evolving as the technology itself advances.

Pro Tip: Consider your risk tolerance and investment goals before choosing an AI ETF. Diversification is key, but understanding a fund’s underlying holdings is crucial.

As the AI sector continues its rapid expansion, these ETFs offer investors a means to participate in its growth, potentially mitigating the risks associated with relying on a few dominant companies.

What factors are most significant to you when choosing an AI-focused ETF – diversification, expense ratio, or performance? Do you believe a concentrated strategy focused on AI leaders or a broader approach targeting emerging companies is more likely to yield successful returns?

Understanding the AI ETF Landscape

The market for AI-related investments is projected to experience substantial growth in the coming years. According to a recent report by Statista, the global AI market is expected to reach $407 billion by 2027. In this very way, understanding the nuances of investing in this space is becoming increasingly critically important for both individual and institutional investors. Diversification remains a cornerstone of sound investment strategy, notably in dynamic sectors like AI where innovation can disrupt established leaders.

Frequently Asked Questions about AI ETFs

• What is an AI ETF? An AI ETF is an exchange-traded fund focused on investing in companies involved in the development,implementation,or utilization of Artificial Intelligence technologies.
• Why invest in an AI ETF? AI ETFs provide diversified exposure to the growth potential of the AI sector without requiring investors to individually select multiple companies.
• What are the risks of investing in AI ETFs? like all investments, AI ETFs carry risks, including market volatility, technological obsolescence, and concentration risk if the ETF is heavily weighted toward a few companies.
• How do I choose the right AI ETF? Consider factors such as expense ratio, diversification, underlying holdings, and investment objectives when selecting an AI ETF.
• are AI ETFs suitable for all investors? AI ETFs may be appropriate for investors with a long-term investment horizon and a tolerance for risk.
• What is the role diversification in an AI ETF? Diversification is key to mitigate risk and capture gains from various segments and companies within the AI ecosystem.
• How often should I rebalance my AI ETF investments? Review your portfolio regularly and rebalance as needed to maintain your desired asset allocation, especially given the rapidly changing AI landscape.

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What are the potential drawbacks of BOTZ’s concentrated holdings in comparison to ROBO or XT?

Understanding the AI Investment Landscape

Artificial intelligence (AI) is no longer a futuristic concept; it’s actively reshaping industries and driving economic growth. Investing in AI technologies presents significant opportunities, but navigating this rapidly evolving sector can be complex. Exchange-Traded Funds (ETFs) offer a diversified and accessible way to gain exposure to the AI market without the need to pick individual stocks. This article explores three strategically chosen ETFs for prudent AI investing, focusing on different approaches to capture the potential of this transformative technology. We’ll cover AI ETF comparison, best AI ETFs, and how to integrate them into a balanced portfolio.

ETF #1: Global X Robotics & Artificial Intelligence ETF (BOTZ)

The Global X Robotics & Artificial Intelligence ETF (BOTZ) is a popular choice for investors seeking pure-play exposure to the robotics and AI sectors.

Focus: BOTZ invests in companies involved in industrial robotics and automation, as well as artificial intelligence, machine learning, and related technologies.

Holdings: Top holdings typically include companies like NVIDIA, ABB, and Keyence. (Holdings are subject to change).

Expense Ratio: 0.68% (as of August 26, 2025).

Strategy: This ETF is ideal for investors who believe in the long-term growth potential of robotics and automation, driven by AI advancements. It’s a more concentrated play,meaning it can be more volatile but also potentially offer higher returns.

Key Benefits: Direct exposure to robotics and AI leaders, potential for high growth.

Considerations: Higher expense ratio compared to broader market ETFs, sector-specific risk.

ETF #2: ROBO Global Robotics and Automation Index ETF (ROBO)

The ROBO Global Robotics and Automation Index ETF (ROBO) takes a broader approach to the robotics and automation theme.

Focus: ROBO tracks an index of companies globally that are involved in robotics, automation, and enabling technologies. This includes companies involved in manufacturing, healthcare, logistics, and more.

Holdings: ROBO’s portfolio is more diversified than BOTZ, including companies like Intuitive Surgical, Cognex, and Fanuc. (Holdings are subject to change).

Expense Ratio: 0.95% (as of August 26, 2025).

Strategy: ROBO offers a more diversified approach to the robotics and automation theme, reducing concentration risk. It’s suitable for investors who want exposure to the entire robotics and automation value chain.

Key Benefits: Broad diversification within the robotics and automation space, global exposure.

Considerations: Highest expense ratio of the three ETFs discussed, potentially lower growth compared to more concentrated ETFs.

ETF #3: iShares Exponential Technologies ETF (XT)

The iShares Exponential Technologies ETF (XT) offers a wider lens on disruptive technologies, including AI, but also encompassing areas like genomics, nanotechnology, and fintech.

Focus: XT invests in companies that are at the forefront of technological innovation, with a significant allocation to AI-related businesses.

Holdings: XT’s holdings are diverse, including companies like Tesla, Illumina, and Netflix, alongside AI-focused firms. (Holdings are subject to change).

Expense Ratio: 0.40% (as of August 26, 2025).

Strategy: This ETF is best for investors who want exposure to a broader range of disruptive technologies, with AI as a key component. It’s a more diversified approach, potentially offering more stable returns.

Key Benefits: Diversification across multiple disruptive technologies, lower expense ratio.

Considerations: Less pure-play AI exposure compared to BOTZ and ROBO, performance tied to the success of various emerging technologies.

AI Investment Risks and Mitigation