Artificial Intelligence ETF Requirements And Analysis

Summary

• They are funds that use artificial intelligence methodologies to select individual securities for inclusion into the fund.
• They are funds that have at least 25% of portfolio exposure to companies that spend large amounts on AI research and development (R&D) expenses.
• They are funds that specifically invest in companies involved in the development of new products or services, technological improvements in scientific research related to artificial intelligence.

Artificial Intelligence is an area of computer science that focuses on the creation of machines that are intelligent that work and react like humans. AI ETFs or Exchange Traded Funds potentially look to benefit from increased incorporation and use of AI, including those involved with industrial and non-industrial robotics, 3D printing, social media, natural language processing, autonomous vehicles and automaton.

AI ETFs are required to meet any one of the following in order to be considered an artificial intelligence fund:

• They are funds that use artificial intelligence methodologies to select individual securities for inclusion into the fund.
• They are funds that specifically invest in companies involved in the development of new products or services, technological improvements in scientific research related to artificial intelligence, or
• They are funds that have at least 25% of portfolio exposure to companies that spend large amounts on AI research and development (R&D) expenses. Examples of such companies are Tesla Motors, Amazon, Netflix, Apple and Alphabet.

1. BUZZ Social Media Insights ETF (BUZ) This exchange traded fund tracks which investments are trending on social media through the lens of machine learning and AI. The BUZZ ETF differentiates itself from the pack by going beyond simplistic keyword analysis to capture the way people are thinking about brands from both business and investment perspectives.

2. Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ) This index provides exposures to those firms operating in the global automation and robotics industries. This includes firms that receive their revenue from artificial intelligence software, industrial robotics and automation, non-industrial robots, and autonomous vehicles.

3. Global Robotics and Automation Index ETF (ROBO) The index is designed to measure the performance of robotics-related and automation-related companies. Companies eligible for inclusion in the Index will derive a portion of revenues and profits from robotics-related and automation-related products or services, including any technology, service or device that supports, aids or contributes, in any capacity, to any type of robot, robotic action and/or automation system process, software or management.

4. Technology Select Sector SPDR Fund (XLK) – This index fund gives investors the opportunity to gain exposure to numerous powerhouse tech firms all under a single ticker. To be included in this ETF, a company must be one of numerous sectors under the technology umbrella.

This includes market segments like IT services, wireless telecommunication services, and semiconductors to name just a few. The fund invests in the most well known companies in the U.S. tech sector, with major holdings in companies like Apple and IBM. The fund splits its assets mainly between the technology and communication services sectors, while allocating mainly to giant and large cap firms.

One of the major strengths of this ETF is the fact that it does not single out a particular sector; rather it invests in companies from all across the technology sector. This makes the fund and ideal choice for investors who want tech exposure, but are unsure as to which particular segment of this broad market that they feel will perform the best.

5. Vanguard Information Technology ETF (VGT) This index fund tracks a broad index of companies in the information technology sector which the company considers to be the following three areas; software, consulting, and hardware. This fund tracks some of the most crucial companies in the technology sector across a wide range of market cap levels. The fund focuses entirely on U.S. stocks, and is relatively top heavy; three securities make up 25% of the fund 54% of assets go to the top ten even though the fund holds over 425 securities in total.

Investors should also note that this fund dedicates the majority of its assets to giant and large cap funds, meaning that it will be less volatile than some of the other products in the space that focus on relatively unproven companies and technologies.

This fund will be more of a value play than one that presents strong growth opportunities. So while this is a decent fund for those looking to achieve broad exposure to the tech sector without the influence of semiconductors, most investors should look to broader fund which take into account all sectors of the technology industry instead for their portfolios.