7 Best Artificial Intelligence (AI) ETFs To Buy Now

May 22, 2024

27 7 minutes read

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As proven by Nvidia’s performance over the last year, artificial intelligence (AI) investing has upside. One challenge, though, is identifying which business models will thrive in this new era of tech innovation. Fortunately, investors can mitigate the risk of choosing wrong by opting for an AI exchange-traded fund over individual stocks.

Let’s explore seven AI ETFs that can drive value in your portfolio as AI transforms the way things are done in business and at home.

AI ETFs Explained

AI ETFs are exchange-traded funds investing in companies that are positioned to benefit from growing AI adoption. These companies can be categorized as enablers, engagers and enhancers:

Enablers supply core components for AI development, such as semiconductor or cloud computing infrastructure. Nvidia (NVDA), Taiwan Semiconductor (TSM) and Microsoft
MSFT
are AI enablers.
Engagers incorporate AI technology into their core product offerings. Cyber security company Darktrace (DARK) uses machine learning for improved detection of and response to threats. ServiceNow
NOW
(NOW) deploys AI within its cloud-based workflow system to enhance the platform’s functionality and efficiency.
Enhancers contribute to the AI ecosystem without directly selling AI solutions. Streaming entertainment and online advertising company Tencent Holdings (TCEHY) is an enhancer. Tencent uses AI to predict the popularity of gaming and content topics before production.

AI funds may include one, two or all three types of AI stocks, depending on the ETF’s strategy. Many also combine AI stocks with robotics companies, since those two disciplines are closely related.

A common goal for investing in AI ETFs is long-term growth. Most of these funds do pay a small dividend, but income is not the headlining feature. Investors interested in regular income should see our list of monthly dividend ETFs instead.

Methodology For Choosing These ETFs

These best AI ETFs were chosen for their efficient expense ratios, net asset values and portfolio diversity. Specifically, they meet these qualifications:

Expense ratio no larger than 0.65%
Net assets greater than $250 million
At least 70 different stocks in the portfolio

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7 Best AI ETFs To Buy Now

This table introduces seven large AI ETFs with expense ratios ranging from 0.10% to 0.65%. Below the table, there’s a brief discussion of each fund’s investing strategy and key advantages.

Table data source: Fund websites

1. Vanguard Information Technology ETF
VGT

VGT by the numbers:

Share price: $538.55
Expense ratio: 0.10%
Inception date: 01/26/2004
Year-to-date return: 10.3%
Number of holdings: 313
30-day SEC yield: 0.58%

VGT Overview

VGT invests in leading technology stocks by tracking the MSCI U.S. Investable Market Information Technology Index. Neither the fund nor the index targets AI stocks specifically, but the tech focus naturally creates solid AI exposure.

Why VGT ETF Is A Top Choice

VGT, like other Vanguard ETFs, is known for its low expense ratio and high quality. VGT is a well-diversified technology fund that holds some of the biggest names in AI, including Microsoft, Nvidia and Broadcom
AVGO
(AVGO). The top 10 stocks in the fund comprise more than 50% of the portfolio; all of them have some level of AI involvement.

VGT is the largest fund on this list. It also has a strong track record, generating a 10-year average annual NAV return of 19.8%.

2. Fidelity MSCI Information Technology Index ETF
FTEC

FTEC by the numbers:

Share price: $159.82
Expense ratio: 0.084%
Inception date: 10/21/2013
Year-to-date return: 10.4%
Number of holdings: 304
30-day SEC yield: 0.57%

FTEC Overview

FTEC tracks the MSCI USA IMI Information Technology Index, which favors U.S. large-cap stocks.

Why FTEC ETF Is A Top Choice

FTEC’s top holdings list overlaps with VGT’s. Both funds contain S&P 500 constituents Microsoft, Apple
AAPL
, Nvidia and Broadcom. Tech giants like these have the deep pockets necessary to make investments that can drive meaningful growth in AI capabilities.

Semiconductor companies comprise nearly a third (30%) of FTEC’s portfolio. Systems software stocks and technology hardware stocks make up 25% and 20% of the portfolio, respectively.

3. SPDR S&P Kensho New Economies Composite ETF (KOMP)

KOMP by the numbers:

Share price: $47.68
Expense ratio: 0.20%
Inception date: 10/22/2018
Year-to-date return: 2.2%
Number of holdings: 435
30-day SEC yield: 0.94%

KOMP Overview

KOMP tracks the S&P 500 Kensho New Economies Composite Index. The index includes companies pursuing transformative innovation in robotics, automation, AI, connectedness and processing power.

Why KOMP ETF Is A Top Choice

KOMP departs from the popular focus on mega cap tech stocks, which is a good thing for investors who want to limit their concentration in Microsoft, Apple, Nvidia and the like. The fund’s top stock is Leidos Holdings (LDOS), which works in defense and aerospace providing AI, cybersecurity and digital transformation services to its customers. Other top KOMP positions are Coinbase (COIN), Teledyne Technologies
TDY
and unmanned aerial vehicle company Ehang Holdings (EH).

KOMP’s portfolio is 84% U.S. stocks, but includes exposure to China, Canada, Israel, Hong Kong, Brazil and others.

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4. iShares Robotics and AI Multisector ETF
IRBO

IRBO by the numbers:

Share price: $34.48
Expense ratio: 0.47%
Inception date: 8/26/2018
Year-to-date return: 0.1%
Number of holdings: 109
30-day SEC yield: 0.51%

IRBO Overview

IRBO tracks the NYSE FactSet Global Robotics and Artificial Intelligence Index. The index includes companies in developed and emerging markets that are poised to grow with increased adoption of robotics and AI technologies.

Why IRBO ETF Is A Top Choice

The IRBO portfolio includes companies that either enable or use robotics and AI technologies.

No stock in IRBO comprises more than 3% of the portfolio. This strategy prevents excess concentration in larger, potentially overvalued stocks like Nvidia. The negative is that when a big company spikes, IRBO shareholders see a lesser impact. On the other hand, IRBO’s low weighting does create a window for shareholders to benefit from rallies in smaller stocks.

5. First Trust Nasdaq AI and Robotics ETF
ROBT

ROBT by the numbers:

Share price: $43.84
Expense ratio: 0.65%
Inception date: 02/21/2018
Year-to-date return: -4.0%
Number of holdings: 108
30-day SEC yield: 0.24%

ROBT Overview

ROBT tracks the Nasdaq CTA Artificial Intelligence and Robotics Index. The index invests in companies at all levels of the AI and robotics value chains.

Why ROBT ETF Is A Top Choice

ROBT takes a broad view on AI exposure by investing in enablers, engagers and enhancers. The portfolio includes at least the top 30 stocks in each category in terms of AI involvement. Stocks are then weighted so that enablers collectively comprise 25% of the portfolio, engagers comprise 60% and enhancers comprise 15%.

Every company in the portfolio has a minimum market cap of $250 million and a minimum average trading volume of $3 million.

6. Defiance Quantum ETF
QTUM

QTUM by the numbers:

Share price: $61.57
Expense ratio: 0.40%
Inception date: 09/04/2018
Year-to-date return: 13.6%
Number of holdings: 71
30-day SEC yield: 1.0%

QTUM Overview

QTUM tracks the BlueStar Quantum Computing and Machine Learning Index. Quantum computing embeds the principles of quantum theory into algorithms and hardware to accommodate tasks that are too big for classic supercomputers.

Why QTUM ETF Is A Top Choice

The QTUM portfolio focuses on companies that enable quantum computing, which extends the limits of what AI and machine learning can accomplish. These stocks include makers of hardware, connectivity solutions and cooling systems plus companies that collect and manage big data. Top holdings include business intelligence provider Microstrategy (MSTR), memory chip maker Micron Technology
MU
and semiconductor company Onto Innovation (ONTO).

7. Invesco AI and Next Gen Software (IGPT)

IGPT by the numbers:

Share price: $45.39
Expense ratio: 0.61%
Inception date: 06/23/2005
Year-to-date return: 16.5%
Number of holdings: 98
30-day SEC yield: -0.1%

IGPT Overview

IGPT tracks the STOXX World AC NexGen Software Development Index. The index features companies that earn direct revenue supporting software development.

Why IGPT ETF Is A Top Choice

AI and automation technologies are driving an expansion of the global software market. Grand View Research expects to see an 11.5% CAGR in software worldwide through 2030. That prediction makes a case for investing in software development enablers via IGPT. The fund’s holdings include a mix of small, medium and large companies across the value and growth spectrum.

Alphabet comprises more than 10% of the fund, which may present an overconcentration issue next to S&P 500 and large-cap tech funds.

Bottom Line

Investors have their pick of AI portfolios with expense ratios as low as 0.084%. Some AI ETFs focus on mega-cap stocks and therefore overlap with S&P 500 funds and similar core holdings. That could be an advantage or disadvantage, depending on the investor’s strategy. Those who prefer to add something new to their asset mix might consider KOMP, IRBO and QTUM over VGT or FTEC.

Frequently Asked Questions (FAQs)

What is the best ETF for AI?

Vanguard Information Technology ETF (VGT) is one of the best all-purpose AI ETFs. The fund manages net assets of $73.5 billion and has an efficient expense ratio of 0.10%.

Does Vanguard have an AI ETF?

Vanguard Information Technology ETF (VGT) invests in AI-focused companies, including Microsoft (MSFT), Apple (AAPL) and Nvidia (NVDA.

Does Fidelity have an AI ETF?

Fidelity MSCI Information Technology Index ETF is a popular choice for new AI investors. The fund has $9.2 billion in net assets and an efficient expense ratio of 0.084%.

AI ETFs have varying levels of risk. Funds that focus on S&P 500 technology stocks are less risky than portfolios with heavy exposure to unproven, small-cap stocks.