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Given the enthusiasm for artificial intelligence and the broader automation sphere, it’s unlikely that these innovations will fade anytime soon. That said, the tech sector has struggled recently. As Bloomberg put it, Wall Street is getting a wake-up call regarding overexposure to digital intelligence. However, this framework also highlights the importance of exchange-traded funds, particularly AI and robotics ETFs.
By their nature, these funds offer risk mitigation. Of course, nothing is risk-proof – I want to be crystal clear about that. However, by spreading exposure across a wide canvas, investors can distribute the probability of downside. Further, if some entities within the basket of securities struggle, the other companies can help pick up the slack.
Obviously, that also means maximum upside potential is limited. Even if some enterprises perform swimmingly well, they could be weighed down with the other companies’ less-than-stellar returns. Still, at a time when the tech ecosystem is fighting for traction, these AI and robotics ETFs make plenty of sense.
ROBO Global Robotics and Automation Index ETF (ROBO)
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Investors seeking a diverse range of the world’s best automation specialists should consider the ROBO Global Robotics and Automation Index ETF (NYSEARCA:ROBO). A fund that seeks to track the performance of the namesake index, ROBO is best known for its wide footprint.
While a majority of the ETF’s individual holdings are centered in the U.S. (or 46%), the next largest region is Japan at 19.6%. Coming in a close third place is the Eurozone, which accounts for 11.5% of the portfolio.
To be sure, investing in foreign securities – which are often traded over the counter – can be a pain for buyers. With ROBO, investors have a more convenient alternative, making it one of the best AI and robotics ETFs to consider.
In terms of top holdings, Teradyne (NASDAQ:TER) takes pole position with 2.41% of total net assets. That’s followed by seemingly everyone’s favorite semiconductor firm Nvidia (NASDAQ:NVDA). Finally, Intuitive Surgical (NASDAQ:ISRG) rounds out the top three.
ARK Autonomous Technology & Robotics ETF (ARKQ)
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For those that want a slightly different flavor in their AI and robotics ETFs, ARK Autonomous Technology & Robotics ETF (BATS:ARKQ) could be an intriguing opportunity. Per its prospectus, ARKQ seeks long-term capital growth, featuring a mixture of domestic and foreign equities that focus on autonomous innovations. Relatively speaking, it could be a speculative deal considering that it’s down about 1% year-to-date.
While ARKQ is diverse, with holdings across the world, the vast majority of its holdings (86.9%) are based in the U.S. Japan comes in second place but it’s a distant ranking at 3.8%. While the technology sector naturally takes up the most sector weighting at 39.81%, the industrials and consumer cyclical segments hold 34.62% and 14.31%, respectively.
What makes the ARKQ distinct from many other AI and robotics ETFs is its focus on the defense industry. For example, Kratos Defense (NASDAQ:KTOS) represents the third-biggest holding at 9.2% of total net assets. Also, the weaponized drone manufacturer AeroVironment (NASDAQ:AVAV) is one of the top 10 ARKQ entities with a 5.46% weighting.
Global X Robotics and Artificial Intelligence ETF (BOTZ)
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Another intriguing idea among AI and robotics ETFs is the Global X Robotics and Artificial Intelligence ETF (NASDAQ:BOTZ). Per its prospectus, the BOTZ fund tracks the Global Robotics & Artificial Intelligence Thematic Index. Unlike some of the other sector-related baskets, BOTZ has performed quite well this year, gaining slightly over 9%.
This performance is important not just for competitive reasons but also for comparative ones as well. With an expense ratio of 0.68%, it’s not the cheapest ETF available, with the category average landing at 0.82%. However, for those who seek diversification, BOTZ may make up for this cost. While U.S.-based entities make up 47.1% of the fund, Japanese companies make up 29.5%. Also, European enterprises outside the Eurozone make up 14.2% of BOTZ.
Not surprisingly, BOTZ’s top holding is Nvidia, carrying 13.29% of total net assets. Intuitive Surgical comes in second place at 9.03%. Rounding out the top three is Dynatrace (NYSE:DT), an application software specialist focusing on security and analytics.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
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