3 Smart AI ETFs For Intelligent Passive Investing Needs

Key Points

• The Roundhill Generative AI & Technology ETF is relatively new but focused on blue-chip AI plays. 
• Wisdom Tree’s Artificial Intelligence & Innovation Fund is a larger and more established ETF.
• Managers at Global X have said that AI is in the early innings and will be a significant driver of growth this year.

AI is expected to grow significantly over the next 7 years, and this is not an opportunity passive investors should pass up. Several top ETFs give pure-play exposure to AI without the risk that some bring. ETFs like The Roundhill Generative AI & Technology ETF NYSEARCA: CHAT, The Wisdom Tree Artificial Intelligence & Innovation ETF BATS: WTAI, and The Global X Artificial Intelligence & Technology ETF NASDAQ: AIQ all give broad exposure to the market with a dual focus on blue-chip leaders and the small-cap names that are driving the industry today. 

What is the opportunity? AI is estimated to be worth $100 billion in 2023 and grow at a nearly 50% CAGR over the next decade. The outlook is for AI to grow by 20X by 2030 with explosive technology, infrastructure, and services growth. Services will be the largest and fastest-growing segment by far, so blue-chip tech companies will likely be the ones to make the biggest gains over the long term. 

Names that spring to mind are NVIDIA NASDAQ: NVDA, Oracle NASDAQ: ORCL, and Adobe NASDAQ: ADBE, which have all proven critical to the AI industry. Oracle is fundamental to IT infrastructure and data handling; Adobe is the same, with the added benefit of its “ubiquitous” interface and data-generating creative tools.

NVIDIA, the stock that got the AI market into overdrive, will be the #1 AI stock pure-play for the foreseeable future due to its chip technology and lead into AI services. The new platform for AI provides tools and infrastructure for AI developers and applications at all levels. 

Roundhill Generative AI & Technology ETF; Solid Blue Chip Exposure 

All the major AI ETFs worth owning include some of the same names, but the focus and mix are always different. The Roundhill Generative AI & Technology ETF focuses on blue-chip names and has little exposure to small-cap and start-ups. The downside is that it is the smallest fund on this list, with less than $100 million in assets to its credit. 

The fund also does not pay a dividend as the others, but the holdings mitigate that. The top holding is NVIDIA, followed by Microsoft (NASDAQ: MSFT) and Alphabet NASDAQ: GOOG, the companies that are arguably in the best positions to benefit from all segments of AI over the long term. Outside of the top 3, the holdings include Baidu NASDAQ: BIDU, Adobe, Marvell Technology NASDAQ: MRVL, Meta NASDAQ: META, and Advanced Micro Devices NASDAQ: AMD, which round out the who’s who of top AI players today. 

Other risks of CHAT are its young age. While it is the best-positioned AI ETF, it is also the youngest and has only been traded for a few months. If the passive investment market doesn’t get behind this name, it could whither away to nothing and disappear. 

Wisdom Tree Artificial Intelligence & Innovation Fund; Deeper Exposure To AI 

Wisdom Tree’s Artificial Intelligence & Innovation Fund is a larger and more established ETF going on 2 years old. The fund has about $145 million under management and includes NVIDIA and Meta Platforms in the top 5.

The other 3 top 5 names are Alchip, a fabless semiconductor company focused on ASIC and SoC designs, IonQ NYSE: IONQ, which is a quantum computing company; and Synopsys NASDAQ: SNPS, a design automation firm for the semiconductor industry. Unlike CHAT, shares of AIQ pay a small dividend which helps to offset the fees. 

Global X Artificial Intelligence & Technology ETF; Still In The Early Innings 

Managers at Global X have said that AI is in the early innings and will be a significant driver of growth over the long term. That’s good news for the Global X Artificial Intelligence & Technology ETF, the largest pure-play AI ETF on the market. It has nearly $500 million under management and the most compelling portfolio.

The company’s top 10 includes Alphabet, Amazon, and Meta, but also Adobe, Intel, Oracle, and NVIDIA, which represent AI technology, infrastructure, and services with a bias toward services and the long-term embedding of AI into our daily lives.