Those who want to invest in the stock market on artificial intelligence can use ETFs.
These are funds whose shares are exchange-traded, and they try to replicate the performance and return of this sector.
ETFs on artificial intelligence (AI) listed on the stock exchange
Actually, in addition to ETFs, whose performance passively follows an index related to artificial intelligence, there are also actively managed funds in which the fund manager selects and manages a particular portfolio of AI-related securities with the goal of outperforming the benchmark or index.
Of course, actively managed funds add a level of risk, namely that of choosing which securities to include in the portfolio, and more importantly, whether to upgrade them. In contrast, ETFs that replicate AI indexes turn out to have slightly less risk.
According to Forbes Advisor, the best AI ETFs for 2023 are Xtrackers Artificial Intelligence and Big Data UCITS ETF 1Cm, iShares Automation & Robotics UCITS ETF, Invesco EQQQ Nasdaq-100 UCITS ETF, and Amundi MSCI Robotics & AI ESG Screened UCITS ETF.
JustETF also suggests WisdomTree Artificial Intelligence UCITS ETF USD, and L&G Artificial Intelligence UCITS ETF.
Note that when choosing an ETF to invest in, some technical data should also be kept in mind, such as volume of assets under management, number of holdings, and annual management costs (TER), as well as performance and volatility, of course.
Regarding performance, for example, the Nasdaq CTA AI & Robotics index outperformed both the S&P 500 and Nasdaq 100 index from 2020 to 2021, but then lost more in 2022, percentage-wise.
So it is by no means certain that ETFs on artificial intelligence turn out to be better investments than, for example, those on the stock market in general, or on the tech market.
However, the AI market remains a market with ample growth potential that is still untapped, although it is mainly a few individual companies (such as Nvidia) that are the best performers.
What’s more, there are not yet many listed companies dealing exclusively with AI, so indexes and managed portfolios cannot focus exclusively on this specific technology.
The artificial intelligence market
According to a recent McKinsey analysis, if in 2017 only 20 percent of companies claimed to use artificial intelligence, so much so that this percentage has now exceeded 50 percent.
It is in fact a useful technology in many areas, and its use is therefore expected to expand more and more.
Moreover, according to Statista, the growth in demand for AI services is expected to continue, such that it could reach $2 trillion by 2030.
However, it must be said that this is a highly innovative technology sector, within which changes can be very large and rapid. This makes it necessary to update one’s portfolios as competition becomes more pronounced, and new projects supplant older ones.
It is also clear from all of this why AI indexes actually do not refer only to the specific and exclusive performance of the artificial intelligence sector, since this is a technology that hardly ever operates alone.
Interactions with other technology sectors, such as big data or robotics, are the order of the day and inseparable.
The characteristics of AI funds
It should be mentioned that not all funds that replicate the performance of AI stocks are the same.
First of all, there are those that refer more specifically to stocks of companies that deal primarily with artificial intelligence, while others focus on U.S. large-caps such as Microsoft and NVIDIA that also deal with other things.
The latter seem to be the ones favored by the market, since they are based on established companies that can invest heavily in AI.
Other funds, on the other hand, are more speculative, thus with higher potential gains but much higher levels of risk.
Then there are also those that instead focus on those companies that merely use AI but without producing or developing artificial intelligence tools or services.
Indeed, several advisors suggest focusing precisely on the latter, that is, not to risk too much by exposing themselves to the ups and downs of this market, but to prefer other markets that are benefiting from this new technology.
By doing so the opportunities are actually broader, because for example some of the most promising uses of AI are in traditional sectors such as healthcare or industry.
Finally, it should be mentioned that ETFs on artificial intelligence tend to be subject to a U.S. equity preponderance.