If you're busy with work, family, hobbies, and other commitments, you probably don't have the luxury of dedicating hours to stock research. Plus, let's face it: picking individual stocks is harder and riskier than buying multiple companies together. That's why exchange-traded funds (ETFs) are an attractive investment vehicle. ETFs trade like stocks, but they hold dozens of stocks tied to a particular theme. There are even a few ETFs focused on the hottest area in the market: artificial intelligence (AI).
There's a lot of hype around AI, and the enthusiasm is right. Companies are spending billions of dollars researching and bringing real-world solutions to market, and organizations across many industries are already integrating generative AI and large language models (LLMs) into their workflows. The efficiencies these tools offer, combined with a competitive business world, should encourage more companies to adopt them.
One estimate predicts that the global market size will approach $2 trillion by the end of the century, as shown below.
What is the best artificial intelligence ETF?
Not all ETFs are created equal. Factors like diversification, assets under management, past performance and expense ratios are important. Global X Robotics & Artificial Intelligence ETF (Nasdaq: BOTZ) is a popular AI fund. It has $2.8 billion in assets under management and a competitive expense ratio of 0.68%. The portfolio currently includes 43 companies, with a focus on companies that “benefit from the increasing adoption and use of robotics and artificial intelligence.”
BOTZ is heavily weighted towards its top holdings. NVIDIA (NASDAQ: NVDA) The top four stocks account for more than 35% of the fund's total holdings. SPDR S&P 500 ETF (NYSE: SPY) Over the past year, Nvidia has increased by 248%.
Besides its reliance on a few top stocks, another potential drawback is its lack of holdings in big technology stocks. alphabet (Nasdaq: GOOG)(Nasdaq: GOOGL), Amazon (Nasdaq: AMZN), Meta (NASDAQ), and Microsoft (Nasdaq: MSFT)and one of my personal favorites, Arm Holdings (Nasdaq: ARM).
BOTZ is best suited for investors looking for a well-managed portfolio with a small number of stocks focused outside of the big tech companies.
Global X is Artificial Intelligence and Technology ETFs (Nasdaq: AIQ)AIQ owns stocks in 84 companies, has an expense ratio of 0.68%, and has crushed the S&P 500 over the past year as shown below.
The Artificial Intelligence & Technology ETF holds all of the stocks listed above except for Arm Holdings. Its top holding is also Nvidia, but it only accounts for 5% of the total. AIQ is a great choice for those looking for a diversified portfolio with a focus on large technology companies. AIQ is a great choice with a great recent track record.
This is my favorite
But my favorite AI ETF is WisdomTree Artificial Intelligence Innovation Foundation (NYSE:MKT:WTAI)WTAI is the worst performing fund in the chart above, but that doesn't mean it won't perform better in the future. Nvidia and Microsoft make up about 13% of the S&P 500 and 8% of AIQ, but less than 5% of WTAI, which explains their poor performance. These stocks have skyrocketed in the last year, but may soon reach fair value and level off.
The WisdomTree Artificial Intelligence Innovation Fund is the most diversified of the three funds I chose, with no company accounting for more than 3% of assets. It currently holds 75 stocks, including some of the biggest technology companies. It also has the lowest expense ratio at 0.45%. Its largest investments are in semiconductors (33%) and AI software (24%), booming industries with room for significant growth as AI becomes more widespread. The semiconductor industry is cyclical, and after a tough 2022 and 2023, it should be heading back into an upcycle, so its recent underperformance could change soon.
WTAI is a great option for those looking for significant diversification, a low expense ratio, and exposure to some of the biggest companies in their industry.
You don't need to be a great stock picker to profit from a growing industry like AI. Sometimes it's best to let someone who has more time to track stocks do the picking for you. ETFs offer a broader investment horizon while reducing risk and volatility. There are countless options, but maybe one of the above is right for you.
Should you invest $1,000 in the WisdomTree Artificial Intelligence Innovation Fund right now?
Before buying shares in WisdomTree Artificial Intelligence and Innovation Fund, consider the following:
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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Bradley Guichard has invested in Alphabet, Amazon, Arm Holdings, and Nvidia. The Motley Fool has invested in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Here are the top artificial intelligence (AI) ETFs to buy right now. This was originally published by The Motley Fool.
