If you don't have hours to devote to stock research, ETFs are a fantastic solution.
Between work, family, hobbies, and other commitments, most people don't have hours to devote to stock research. Plus, let's face it. Picking individual stocks is more difficult and risky than buying a basket of companies. This makes exchange-traded funds, or ETFs, an attractive vehicle. ETFs trade like stocks, but the funds hold dozens of stocks tied to a specific theme. Several ETFs cater to the market's hottest sector: artificial intelligence (AI).
There is a lot of hype around AI, and the excitement is guaranteed. Companies are spending billions of dollars researching real-world solutions and bringing them to market, and organizations in many industries are already integrating creative AI and large language models (LLMs) into workflows. The efficiencies these tools provide and our highly competitive business world will encourage more companies to adopt them.
The global market is estimated to reach $2 trillion by the end of this decade, as shown below.
Image source: Statista.
What are the best artificial intelligence ETFs?
Not all ETFs are created equal. Factors such as diversification, assets under management, historical performance, and expense ratio are important. gave Global X Robotics and Artificial Intelligence ETF (BOTZ 0.13%) is a popular AI fund. It has $2.8 billion in assets under management and an expense ratio of 0.68%, which is competitive. It currently has 43 companies in its portfolio, focusing on those that will “benefit from the adoption and use of robotics and artificial intelligence.”
BOTZ is heavily weighted towards its top holdings. Nvidia (NASDAQ: NVDA ) makes up more than 10% of the fund, and its top four holdings account for more than 35%. The fund has underperformed. SPDR S&P 500 ETF (NYSEMKT: SPY ) Over the past year, despite Nvidia's 248% increase.
In addition to reliance on a few top holdings, another potential drawback is the lack of large tech holdings. BOTZ investors miss out. the alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL ), Amazon (NASDAQ: AMZN ), Meta (NASDAQ), and Microsoft (NASDAQ: MSFT )and even one of my personal favorites, Arm Holdings (NASDAQ: ARM ).
BOTZ is best suited for investors looking for a well-managed portfolio that includes a few stocks with a focus outside of big tech.
Also manages Global X. Artificial Intelligence and Technology ETF (AIQ -0.21%). AIQ holds positions in 84 companies, has an expense ratio of 0.68%, and has crushed the S&P 500 over the past year, as you can see below.
SPY Total Return Level data via YCharts
The Artificial Intelligence and Technology ETF has positions in all of the stocks above except Arm Holdings. Its top stock is also Nvidia, but it's only 5% of the total. AIQ is perfect for those looking for a diversified portfolio with an emphasis on big tech. AIQ is an excellent choice with a strong recent track record.
This is my favorite.
However, my favorite is the AI ETF. WisdomTree Artificial Intelligence and Innovation Fund (WTAI -1.11%). WTAI is the worst performing fund in the chart above, but that doesn't mean it won't do better going forward. Nvidia and Microsoft account for about 13% of the S&P 500 and 8% of the AIQ but less than 5% of the WTAI, which explains the underperformance. These stocks exploded last year, but they may soon hit a reasonable price and level.
The WisdomTree Artificial Intelligence and Innovation Fund is the most diversified of the three funds I selected, with no one company making up more than 3% of assets. He currently owns 75 stocks, including big tech names. It also has the lowest expense ratio at 0.45%. Its most significant investments are in semiconductors (33%) and AI software (24%), booming industries with serious room for growth as AI grows. Its recent underperformance could change quickly, as the semiconductor industry is cyclical and is headed for another upcycle after a difficult 2022 and 2023.
WTAI is a great choice for those who want significant diversification, a low expense ratio, and exposure to the industry's biggest names.
You don't have to be a brilliant stock picker to take advantage of an emerging industry like AI. Sometimes, it is better to let those who have more time to choose the following stocks. ETFs offer broad exposure with low risk and volatility. There are tons of options; Perhaps the one mentioned above is right for you.
Suzanne Frey, an Alphabet executive, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Bradley Guichard has positions in Alphabet, Amazon, Arm Holdings and Nvidia. The Motley Fool has positions and recommends Alphabet, Amazon, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a Disclosure Policy.