Co-founder of Affari Miei
8 Maggio 2024
L’artificial intelligence it’s the trend of the moment, everyone is talking about it and everyone is curious about it, so without a doubt the idea of investing in AI. That’s why today we will see the Artificial Intelligence ETFfocusing on their characteristics and the potential of this sector.
In fact, investing in artificial intelligence today is more than a solid reality, and its applications truly cover a wide spectrum.
All we have to do is delve into the topic and try to understand what yours are potential on the investment side.
Enjoy the reading!
This article talks about:
Artificial intelligence: what are we talking about?
L’artificial intelligence (AI)once relegated to the realm of science fiction, has now become a tangible reality that permeates many aspects of our daily lives.
In fact, in recent times there has been a lot of talk about it, so it is better to delve deeper into the issue to see all its applications and implications.
Artificial intelligence refers to the ability of machines to perform tasks that typically requirehuman intelligence.
These activities include, among others:
Natural language recognition; Reasoning; Problem solving; Pattern recognition.
AI technologies use complex algorithms and data to learn from their inputs and improve their performance over time.
The origins date back several years, as the idea of intelligent machines had significant growth throughout the 20th century, and the term was coined in 1956, during a conference at Dartmouth University.
From that moment until today, multiple advances have occurred, so much so that today we are talking about increasingly advanced innovations.
As regards the applications, they are many and different from each other. We range from online recommendation systems, to voice assistants such as Siri or Alexa, through autonomous vehicle driving and data analysis in the financial and healthcare sectors.
AI has already shown that it can improve efficiency and accuracy in numerous fields, acting alongside it as an aid to humans (see also ChatGPT).
Since there has been this diffusion of AI, people have also begun to be interested in investments in this field, and without a doubt one of the most accessible ways to invest in this sector is undoubtedly through ETFs.
The Artificial Intelligence ETF in fact they offer investors the opportunity to participate in the potential gains derived from the growing use of AI. These investment funds contain a selection of stocks of companies active in the field of AI, which can include hardware and software manufacturers, technology services companies and much more.
After this introduction, all we have to do is see what the best AI ETFs.
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The three best AI ETFs on the Italian Stock Exchange
Let’s look at three equity-type ETFs.
L&G Artificial Intelligence UCITS ETF
This fund tracks the ROBO Global Artificial Intelligence Index, which in turn tracks the performance of companies that have a high portion of their business and related revenues derived from the Artificial Intelligence sector. The stocks included are filtered according to ESG (environmental, social and corporate governance) criteria.
The fund has a large size, equal to 644 million euros, and was launched in July 2019. This is a 5-year fund, so we have a fairly long period of time to be able to understand information and make some reasoning.
It has a physical replication method and has no currency hedging: the tax domicile is in Ireland.
The dividend distribution policy is ad accumulationtherefore the coupons are not distributed to investors with a certain temporal frequency, but are instead reinvested in the fund itself, to make the most of the compound interest mechanism.
Il management cost is 0.49% per annum, and its profile of risk is equal to 6on a scale ranging from 1 to 7, so we are on a high risk, suitable only for aware investors who are able to tolerate fluctuations.
Furthermore, the fund is aimed at investors who intend to keep their capital invested for at least 5 years.
I sectors the main ones that make up the basket are the IT sector at 71.10%, followed by the consumer discretionary goods sector with 11.70% and the healthcare sector, with 4.90%.
Among the first 10 components in the basket we have companies such as Microsoft, NVIDIA, Cloudflare and Autodesk.
WisdomTree Artificial Intelligence UCITS ETF
This ETF tracks the Nasdaq CTA Artificial Intelligence Index.
The Nasdaq CTA Artificial Intelligence Index tracks Artificial Intelligence (AI) companies identified by the Consumer Technology Association that enable, engage or enhance (the CTA) artificial intelligence.
We are faced with a large fund, with assets under management amounting to 800 million euros, which was launched in November 2018.
It has a physical replication method, is not currency hedged and is tax domiciled in Ireland.
This fund also pursues an ad dividend policy accumulationand has a total annual cost of 0.40%.
Let’s now see his profile risk: stands on the level 5 on a scale of 1 to 7, so we can rate it as a medium/high risk.
If we focus on the graph, we can see that since the beginning of the year it has achieved a performance of 4.45%.
The basket contains many companies from the United States, followed by companies from Taiwan and South Korea.
I’ll give you some names society in which you will find yourself investing if you were to choose this fund: NVIDIA, Qualcomm, Teradyne.
Xtrackers Artificial Intelligence & Big Data UCITS ETF
The last ETF that I present to you is always present on the Italian Stock Exchange, but it replicates the Nasdaq Global Artificial Intelligence and Big Data index, which replicates international companies in the artificial intelligence, big data and cybersecurity sector. The stocks included are filtered according to ESG (environmental, social and corporate governance) criteria.
This fund also has a large size of 2,725 million euros, and was launched in 2019.
Its replication method is physical and has no currency hedging. Also in this case his tax domicile is in Ireland.
Il management cost amounts to 0.35% per annum, and regarding its profile of risk we are on the level 5on a scale ranging from 1 to 7: medium/high level here too.
If we stop to analyze the composition of the fund, we see that there are mostly companies from the United States, followed by those from South Korea and Germany.
As regards i sectorswe have the majority composed of application software, semiconductors, system software and interactive media and services.
Taking a look at the graph of performancewe see that since the beginning of the year the fund has gained 13.08%.
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Is it worth investing in artificial intelligence?
We finished the discussion and we saw what are the best artificial intelligence ETFs.
Now we can try to draw conclusions and see if this investment could be interesting and profitable, how best to invest in artificial intelligence and if it actually AI ETF they seem to be the answer to our needs.
There is no doubt about it potential industry: AI is one of the most innovative and promising technologies of our time, and has enormous growth potential.
Companies that invest in artificial intelligence can benefit from a significant competitive advantage, such as improving operational efficiency or creating completely new products and services.
Furthermore, AI technologies can automate repetitive and complex processes, reducing dependence on human labor and improving the accuracy and timeliness of business decisions. This can translate into improved profitability and long-term competitiveness for companies that adopt AI.
Investing in artificial intelligence through ETFs allows investors to gain direct exposure to a growing sector.
Without a doubt, with the increasingly widespread adoption of AI in various sectors of the economy (including healthcare, finance, manufacturing, etc.), the opportunities for growth in the field of AI are considerable.
AI ETFs offer a convenient way to tap into this growth potential without having to pick individual stocks or do in-depth market analysis.
I can’t tell you with certainty what the future will be because I don’t have a crystal ball: what is certain is that we are faced with an interesting sector and above all full of opportunities.
I can advise you to consider it for your future investments if you want to enrich your portfolio and want to obtain increasing returns.
I also suggest you think about an investment in this sense following the perspective of diversification: in this way you will be able to spread the risk across different funds, you will be able to try to reduce costs and above all you will not have all your savings concentrated on a single sector or a single country.
Other Resources
If you are looking for articles on ETFs that are worth investing in and that are somehow related to artificial intelligence, here are some recommendations:
If you are starting to invest and are interested in ETFs I also recommend you download this free report which allows you to understand more about this topic and invest in an informed manner.
Before saying goodbye, I’ll also leave you some guide with which to begin a profitable investment journey:
Good continuation on Affari Miei.
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