Ai Investment: Top Funds To Watch

Artificial intelligence (AI) is rapidly transforming the way we live and work, and it's no surprise that investors view the technology as an excellent long-term investment prospect. There are several ways to invest in AI, including individual stocks, exchange-traded funds (ETFs), and venture capital funds.

Some of the top-performing AI stocks include NVIDIA, Alphabet (Google's parent company), Amazon, Tesla, and Microsoft. These companies are leaders in AI technology and have the financial muscle to continue developing it.

For those interested in ETFs, there are several options available, such as the Global X Robotics & Artificial Intelligence ETF (BOTZ) and the AI Powered Equity ETF (AIEQ). ETFs allow investors to gain exposure to a broad range of AI companies without having to select individual stocks.

Another option is to consider investing in venture capital funds, which invest in startups and early-stage companies developing innovative AI technologies.

AI has the potential to transform industries and create new ones, but it's important to remember that investing in this sector also comes with risks, including market volatility and regulatory uncertainties.

AI-focused exchange-traded funds (ETFs)

Global X Robotics & Artificial Intelligence ETF (BOTZ)

Global X Robotics & Artificial Intelligence ETF was established in 2016 and focuses on companies that benefit from robotics and AI. This includes enterprises working in industrial robotics, automation, non-industrial robots, and autonomous vehicles. Its top five holdings include Nvidia, ABB, Intuitive Surgical, Keyence, and SMC Corp.

ROBO Global Robotics and Automation Index ETF (ROBO)

ROBO Global Robotics and Automation Index ETF invests in companies driving "transformative innovations" in robotics, automation, and AI. The fund holds 77 stocks with a diverse range of companies, including Intuitive Surgical, Novanta, Zebra Technologies, Fanuc, and ServiceNow.

IShares Robotics and Artificial Intelligence ETF (ARTY)

The iShares Robotics and Artificial Intelligence ETF aims to track the performance of an index of developed and emerging market companies with long-term opportunities in robotics and AI. The ETF has over 100 stock holdings, providing investors with exposure to fast-growing small-cap companies. Its top five investments include Nvidia, Lumen Technologies, SiriusXM Holdings, Genius Sports, and Hello Group.

First Trust Nasdaq Artificial Intelligence ETF (ROBT)

First Trust Nasdaq Artificial Intelligence ETF tracks the Nasdaq CTA Artificial and Robotics Index, which includes companies engaged in AI and robotics across various sectors. The fund holds 107 stocks, with top holdings such as ServiceNow, SentinelOne, Appian, and Palantir.

ARK Autonomous Technology & Robotics ETF (ARKQ)

The ARK Autonomous Technology & Robotics ETF is an actively managed ETF that seeks to invest in companies that stand to benefit from automation and AI. The fund managers focus on areas like energy storage, 3D printing, automation, and driverless vehicles.

IShares Exponential Technologies ETF (XT)

The iShares Exponential Technologies ETF is a large-capitalization fund targeting the Morningstar Exponential Technologies Index. It selects global stocks advancing exponential technologies, including AI. The fund's largest holdings include SoFi Technologies, Coinbase Global, and Meta Platforms.

Defiance Machine Learning & Quantum Computing ETF (QTUM)

The Defiance Machine Learning & Quantum Computing ETF is a multi-cap global fund using the BlueStar Quantum Computing and Machine Learning Index. The ETF invests in companies involved in research, development, and commercialization of quantum computing systems and machine learning. Top holdings include Cirrus Logic, Baidu, and Alteryx.

WisdomTree Artificial Intelligence ETF (WTAI)

The WisdomTree Artificial Intelligence ETF, established in 2018, focuses on providing exposure to companies that use AI technology while also adhering to Environmental and Social Governance (ESG) standards. An experienced AI team selects the index companies and conducts in-depth research.

EquBot AI Powered EQ International ETF (AIIQ)

The EquBot AI Powered EQ International ETF employs artificial intelligence to choose the equities held in the fund. The ETF uses proprietary quantitative models created by EquBot in collaboration with IBM Watson artificial intelligence to select stocks.

Vanguard Information Technology ETF (VGT)

The Vanguard Information Technology ETF is a specialized fund that invests solely in tech equities, excluding sectors like healthcare and telecommunications. This ETF provides more focused exposure to pure tech large-cap companies such as Apple, Microsoft, NVIDIA, Adobe, and Intel.

Invesco QQQ (QQQ)

While not a pure AI play, the Invesco QQQ ETF is worth considering due to its significant exposure to technology and telecommunications industries. Almost half of the fund's assets are in big tech companies with strong AI capabilities, making it a viable option for investors interested in the AI space.

Blue-chip tech companies investing in AI

Blue-chip tech companies are industry leaders with dependable business models, strong reputations, and a history of delivering strong returns. These companies are often favoured by conservative investors due to their attractive risk-reward profiles, but they can also add stability to the portfolios of more risk-tolerant investors. Here are some examples of blue-chip tech companies investing in AI:

Microsoft (MSFT)

Microsoft is currently the biggest investor in OpenAI, the leader in generative AI. It has also invested in OpenAI's new funding round, which values the startup at $157 billion. Microsoft's business AI assistant, Office 365 Copilot, will have general availability on November 1, 2024. The company is also investing in the development of next-generation Blackwell AI chips.

Nvidia (NVDA)

Nvidia is a semiconductor maker whose chips are used in a wide variety of applications, including autonomous vehicles, virtual computing, and cryptocurrency mining. They are also central to many AI technologies. Nvidia is a bellwether for AI stocks and has seen tremendous growth in 2024, briefly overtaking Apple and Microsoft to become the world's most valuable company. The company is ramping up production of its next-generation AI chips.

Google parent Alphabet (GOOGL)

Google's Gemini AI is racing to develop AI chatbots and other generative AI technologies. The company is also investing heavily in data centre infrastructure, AI chips, and research and development.

Amazon.com (AMZN)

Amazon is investing heavily in data centre infrastructure, AI chips, and research and development.

Facebook parent Meta Platforms (META)

Meta is building its own family of Llama AI models, which are available on Amazon Web Services. The company has also launched AI Studio, which enables businesses to build custom AI agents. Meta stock has gained 62% in 2024.

Small, innovative AI companies

When it comes to small, innovative AI companies, investors should be aware that shares in these businesses might seem like the most direct investment in AI, but they may not be the best option. This is because large language models require a lot of data and capital to put together, and small companies will likely need to partner with a bigger company to run their models at a commercial scale.

However, there are still small AI companies that have seen rapid growth in 2024. One example is SoundHound AI Inc., which creates voice-based AI products, such as a voice assistant for restaurants. NVIDIA is another company that has been at the forefront of AI since it began creating AI applications in 2012. It has seen a massive spike in value in 2024, briefly becoming the world's most valuable company. Procept BioRobotics Corp is another small AI company that creates medical robotics solutions for urology.

If you are looking to invest in small, innovative AI companies, it is recommended to open a brokerage account first. You can then decide what kind of AI stock exposure you want, keeping in mind that individual AI stocks can be risky and require a lot of upfront expense and research. Another option is to invest in AI stocks through pooled exchange-traded funds (ETFs) that focus on AI. There are several AI-focused ETFs available, such as the Global X Robotics & Artificial Intelligence ETF and the ROBO Global Robotics and Automation Index ETF.

It is important to note that there is some speculation that the hype around AI may be overblown and that there are signs that investors may be overenthusiastic about the potential of AI. As always, it is important to carefully consider your investment options and diversify your portfolio to minimise risk.

Venture capital funds

When considering venture capital funds that invest in AI, it is important to look for funds with a strong track record of successful investments in the industry. Some of the top venture capital firms investing in AI include:

• OpenAI: Backed by Microsoft, OpenAI is a leader in generative AI and has raised $6.6 billion in new funding, valuing the startup at $157 billion.
• Thrive Capital: Led the latest funding round for OpenAI, demonstrating their commitment to the AI industry.
• SoftBank: A new investor in OpenAI, SoftBank has a history of investing in innovative technologies.
• Andra Capital: This venture capital firm, founded by Haydar Haba, invests specifically in AI companies and has substantial AI interests.
• FBB Capital Partners: This firm, with a focus on mega-cap tech companies, is another option for investing in AI through venture capital.

When investing in venture capital funds, it is crucial to conduct thorough research and due diligence. Consider the fund's past performance, the expertise of the investment team, and the types of companies they invest in. Additionally, keep in mind that venture capital investments tend to be illiquid, so be prepared for a long-term commitment.

By investing in venture capital funds focused on AI, you can gain access to a diverse range of companies driving innovation in this rapidly growing industry.

AI hardware and software

• Global X Robotics & Artificial Intelligence ETF (BOTZ): This fund offers exposure to companies working on both the industry's hardware and software. Its top holdings include Nvidia, Intuitive Surgical, and Keyence Corp, all pioneers in robotics and AI. The fund has a diverse portfolio and a solid track record of returns, making it a great option for those bullish on the long-term growth of the AI industry. However, BOTZ has a relatively high expense ratio of 0.68%.
• Roundhill Generative AI & Technology ETF (CHAT): CHAT targets hardware and software companies that are developing or supporting generative AI. Its top holdings include Nvidia, Microsoft, Alphabet, Meta, and Adobe. It is an actively managed ETF with a 0.75% expense ratio.
• First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT): ROBT invests in enablers, engagers, and enhancers of AI technology. It tracks the Nasdaq CTA Artificial Intelligence and Robotics Index, which includes companies at all levels of the AI and robotics value chains. The portfolio includes a diverse range of companies, with a minimum market cap of $250 million and a minimum average trading volume of $3 million. ROBT has an expense ratio of 0.65%.
• IShares Robotics and Artificial Intelligence Multisector ETF (IRBO): IRBO offers exposure to firms at the forefront of robotics and AI technology, including those involved in industrial robots, 3D printing, drones, and software and hardware development. Its major holdings include Meta Platforms, Nvidia, and Apple. IRBO has a relatively low expense ratio of 0.47% and has performed well over the years, making it a solid option for those bullish on AI's long-term growth.

In addition to these four funds, it is worth noting that many other AI funds and ETFs also invest in hardware and software companies, even if they are not their sole focus. When considering investment options, it is important to research the holdings of each fund to understand its focus and diversification.

Frequently asked questions