Investing in AI: Exploring the Benefits of AI-focused ETFs
Diversify and Mitigate Risk with Exchange-Traded Funds
Artificial intelligence (AI) has emerged as a dominant theme in the stock market, with companies like Nvidia, Microsoft, Amazon, and Alphabet experiencing significant growth. However, the volatility and uncertainty of the AI industry mean that not every company will succeed. To mitigate risk and maximize returns, investors can turn to exchange-traded funds (ETFs) that focus on AI. These ETFs offer diversification and protection against the inevitable failures in the AI sector. Two notable options are the Global X Artificial Intelligence and Technology ETF (AIQ) and the Global X Autonomous and Electric Vehicle ETF (DRIV).
Global X Artificial Intelligence and Technology ETF (AIQ)
The AIQ ETF is an excellent choice for investors new to AI investing. With 86 different stocks, AIQ is one of the most diversified funds in the AI space. While it is heavily weighted towards its top 10 positions, which account for 34.7% of the total portfolio value, these positions include some of the most popular stocks in the AI industry. Nvidia, Intel, Meta Platforms, and Amazon are among the top holdings. The AIQ ETF delivered an impressive 55% return in 2023, outperforming the S&P 500 and showcasing the potential of investing in leading AI companies.
Global X Autonomous and Electric Vehicles ETF (DRIV)
For investors seeking exposure to the AI opportunity around electric vehicles and self-driving technology, the DRIV ETF is a compelling option. With 76 different stocks, DRIV focuses specifically on this niche within the AI sector. Similar to AIQ, DRIV is concentrated, with its top 10 holdings representing 34.4% of the total portfolio value. Nvidia, Intel, Alphabet, and Tesla are among the top holdings. Despite the challenges faced by some companies in the electric vehicle market, DRIV delivered a solid 24% return in 2023, matching the S&P 500. The long-term potential of the electric and self-driving vehicle industry makes DRIV an attractive investment option.
Conclusion:
Investing in AI can be a lucrative endeavor, but it comes with inherent risks. By investing in AI-focused ETFs like AIQ and DRIV, investors can diversify their portfolios and mitigate the impact of individual company failures. These ETFs offer exposure to leading AI companies and capitalize on the growth potential of the AI industry. As AI continues to revolutionize various sectors, investing in AI-focused ETFs can be a strategic move for long-term investors looking to capitalize on this transformative technology.