Investing in an Artificial Intelligence ETF

I recently finished reading Homo Deus by Yuval Noah Harari (Harari, Y. N. (2016). Homo deus: A brief history of tomorrow.) and have become even more fascinated by Artificial Intelligence (AI). It is simply amazing and scary what the future holds in this regard. I really enjoyed this book and, although it is rather lengthy and at times very academic in style, it paints an interesting view of where humankind is headed. AI is at the centre of that picture. While the examples of where AI’s impact will be felt are too numerous to mention in this blog post, one that particularly struck me was with respect to health and medicine. Yuval Noah Harari uses the example of IBM’s Watson computer (which famously won Jeopardyin 2011). Watson can diagnosis diseases more effectively than a human doctor. Watson has a databank of all known illnesses and diseases, along with your potential personal data, allowing it to come up with the proper diagnosis using all of this relevant information. It can also update its databank faster than humans can update their current systems, so Watson can gather information and statistics from clinics around the world instantaneously (ie. flu or other epidemics would be put on the radar more quickly). Also, as Watson is a computer, it never gets tired or sick so can sit and listen issues without worrying about a time clock. Yuval Noah Harari sets forth the question of “What will conscious humans to once we have highly intelligent non-conscious algorithms that can do almost everything better?”  Good question. He states: “The idea that humans will always have a unique ability beyond the reach of non-conscious algorithms is just wishful thinking.”   

On that note, let’s examine an AI ETF – Global X Robotics & Artificial Intelligence ETF. There are many AI ETF’s but I chose to examine this one because it invests in companies that potentially stand to benefit from robotics and AI. Some “AI ETF’s” invest in AI companies whereas some simply use AI to pick the investments and may not invest in AI companies. You must do your research to find out exactly why it is named an “AI ETF”. If you are not sure what an ETF is, or need a refresher, please read ETF's (Part One), ETF's (Part Two) and ETF's (Part Three).

The Global X Robotics & Artificial Intelligence ETF (ticker symbol BOTZ) “seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.” This ETF provides in one stop a great deal of exposure to companies operating in the robotics and AI space. The ETF seeks to provide results that correspond to the performance of the Indxx Global Robotics & Artificial Intelligence Thematic Index. What does that mean? It means this Global X AI ETF is an index-tracking ETF that is going to replicate or match an Index of the same or many more stocks. It will likely sample or select from this broader set of stocks (all publicly traded themselves) to get at the final product of the Global X Robotics & Artificial Intelligence ETF. In this case, when we examine the Indxx Global Robotics & Artificial Intelligence Thematic Index, we see it actually only has 28 stocks in that index so the Global X ETF would likely replicate this in its entirety.  We can learn a great deal about this ETF from the website. In total, the ETF holds 31 different companies, all involved in the AI area. The top ten holdings are as follows: 

 Courtesy of globalxfunds.com

Courtesy of globalxfunds.com

Looking at its largest holding, Nvidia Corp., we learn that it is heavily involved in the AI space, in particular gaming and autonomous vehicles. Nvidia Corp.’s website states that “AI will spur a wave of social progress unmatched since the industrial revolution”. So, the Global X Robotics & Artificial Intelligence ETF contains a number of these types of companies that allow you with one purchase to have exposure to many different companies (it is of course always an option to simply purchase one stock alone and forego the exposure an ETF offers). Both are valid investing options depending on your research. Nvidia trades on the NASDAQ at $264.41 per share whereas the Global X Robotics & Artificial Intelligence ETF trades on the NASDAQ at $23.62.

Finally, a note about the fees on this ETF. The two fees listed are a management fee of 0.68% and an annual operating expense of 0.68%. What this means is you would be charged $6.80 for a management fee on each $1000 invested in this ETF and another $6.80 for an annual operating expense on each $1000 invested so a total of $13.60 for each $1000 invested.

 

 

 

*** Top photo by Joshua Fuller on Unsplash