3 AI ETFs Tapping Into the Heart of the AI Revolution

Key Points

• Many AI stocks that sold off sharply in early April are making moves to recoup those gains.
• Now may be a time to invest in an AI-focused ETF that limits exposure to any single stock.
• The three ETFs in this article can be considered more niche opportunities for investors looking to capitalize on the growth in AI.

One theme emerging from the first quarter earnings season is that the AI revolution is alive and well. Many companies, like Microsoft Corp. NASDAQ: MSFT and Meta Platforms Inc. NASDAQ: META, confirmed significant capital expenditure (CapEx) programs focusing on building out the AI infrastructure. Not surprisingly, many technology stocks with an AI focus that sold off sharply in early April have made a nice comeback.

Investors looking to get involved in this space may want to consider owning shares in an exchange-traded fund (ETF). These funds trade like stocks but contain a collection of stocks (usually around 30). This helps remove the risk entailed from owning any of these stocks individually.

The three ETFs in this article approach AI from different angles. This niche focus means that investors could own one or more of these ETFs as part of an overall AI portfolio.

This Fund Is Investing in Where the Future of AI Is Moving

The Global X Robotics & Artificial Intelligence ETF NASDAQ: BOTZ focuses on the applications that will change the way we think about artificial intelligence. While the fund does carry some of the biggest names in the chip sector, its broader focus is on companies that seek to embed AI into the physical world with a heavy concentration in industrial and healthcare applications.

The fund’s holdings include some of the top names in the chip sector, as well as areas like robotics and healthcare. For example, NVIDIA Corp. NASDAQ: NVDA is a top holding with over 8% weight in the fund. However, Intuitive Surgical Inc. NASDAQ: ISRG also carries about 8% weight. Fans of small-cap names also get exposure to companies like SoundHound AI Inc. NASDAQ: SOUN, although these funds carry less weight.

Like many individual AI stocks, the BOTZ ETF sold off sharply in early April. However, investors can see that it’s made up most of those gains and is approaching its 200-day simple moving average (SMA).

Recent Activity in This ETF Shows Data Centers Aren’t a Dead Trade

As its name implies, the Global X Data Center & Digital Infrastructure ETF NASDAQ: DTCR is focused on AI infrastructure. This earnings season, many tech companies like Meta and Microsoft are confirming that they will continue to spend on AI, but maybe at slightly lower levels. However, the key is that they’re still spending, and this fund doesn’t force you into the risk that may come from a single company.

Not surprisingly, over 50% of the fund’s industry exposure is in real estate investment trusts (REITs) like Equinix NASDAQ: EQIX, Crown Castle NYSE: CCI, and American Tower NYSE: AMT. REITs will likely be among the biggest winners as data centers are built.

This is a relatively young fund, having launched in 2021. As of this writing, it had only about $230 million in assets under management (AUM). However, of the three ETFs on this list, the DTCR ETF has the lowest expense ratio at 0.50%.

This ETF Lets You Explore Top Investments in Generative AI 

The Roundhill Generative AI & Technology ETF NYSEARCA: CHAT focuses on companies in the generative AI space. It has a heavy Magnificent Seven focus, as well as names like Palantir Technologies Inc. NASDAQ: PLTR and Broadcom Inc. NASDAQ: AVGO. This fund is full of heavy hitters in the technology sector, with a heavy focus on software.

The fund’s focus on generative AI explains why it’s the youngest of the three funds on this list, having only launched in 2023. One thing that’s different about this actively managed fund is that it doesn’t track a particular index. It uses a proprietary methodology to score and select the companies. Investors should note that it has an expense ratio of around 0.75%, so it’s pricey. However, investors are paying for exposure to some of the most sought-after names in the broader AI space.