Four Ways to Invest in Artificial Intelligence with ETFs

By Global X
April 26 2024
6 minute read
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Artificial intelligence (AI) is the epitome of a disruptive technology, and it’s here to stay.

AI is already used for various applications across several industries from social media algorithms to chatbots, but its potential is far broader. Opportunities to invest in AI are also vast – particularly via ETFs. So, what are the different ways investors can gain exposure?

What is the AI Investment Opportunity?

As it stands, AI already outperforms humans in several skills including speech and image recognition, reading comprehension, and language understanding, and it is quickly catching up on grade school math and code generation. Whilst AI can be used for more basic tasks in the immediate future, the broad applicability sets the scene for rapid expansion over time. As shown in the chart below, it’s estimated the global economy stands to greatly benefit from AI as nearly US$16 trillion could be added by 2030.

Figures are in USD

Four Ways to Invest in AI with ETFs

Using ETFs can help remove the risk of single stock concentration, or the reliance on individual stock performance, by capturing the broader AI theme with a basket of stocks that may have different levels of exposure.

The next step is deciding what level of exposure you want to the AI thematic. Below are four ways to consider investing in AI with ETFs.

AI Specific Thematic

  • Investors can buy an ETF holding a basket of listed companies that stand to benefit from the further development and utilisation of AI technology in their products and services. This approach gives exposure to the whole AI value chain, from developers and hardware providers to big data analytics. The Global X Artificial Intelligence ETF (ASX: GXAI) aims to simplify the process of investing in AI into one trade on the ASX. It includes household names such as Microsoft and Samsung, as well as a mix of more than 80 other AI-related stocks.

Industries Powering AI

  • Several industries will benefit from AI advancements and adoption, such as semiconductors, robotics, and automation. Investing in these AI-adjacent thematics through targeted ETFs can give investors more concentrated exposure to these areas of the market. Semiconductors are the chips – also referred to as Graphic Processing Units (GPUs) – that power AI data centres and devices. They are essentially the building blocks for AI. Investing in semiconductors is a ‘picks and shovels’ approach to investing in AI, as demand for semiconductors should swell as it becomes more mainstream. The Global X Semiconductor ETF (ASX: SEMI) is currently the only pure-play semiconductor ETF listed in Australia. It invests in companies that design, build, and use semiconductors – providing investors exposure to a range of stocks in the industry. On the other end of the value chain is robotics and automation, which represent the end users of the AI value chain, like industrial robots and autonomous vehicles. The Global X ROBO Global Robotics & Automation ETF (ASX: ROBO) captures this industry by investing in companies that stand to benefit from increased adoption and utilisation of robotics and artificial intelligence.

Mega Cap Companies

  • Mega cap companies such as Meta, Netflix, and Amazon have heavily invested in AI over the last decade. In fact, over the last year the ‘magnificent seven’ have spent more than $160 billion in the space. As such, ETFs which aim to track the performance of this concentrated group of mega cap technology stocks stand to benefit from the development and adoption of AI. The Global X FANG+ ETF (ASX: FANG) offers exposure to ten of these stocks which are committing significant capital to advancing their AI capabilities across their company and product offering.

Broad Index ETFs With a Tech Tilt

  • Selecting a broader index ETF which has a heavy tilt to technology stocks is a more all-encompassing way to invest in AI. Doing so essentially casts a wide net to capture companies that are currently using and developing AI capabilities, alongside companies that may do so in the future or benefit indirectly. For example, the Global X Morningstar Global Technology ETF (ASX: TECH) invests in companies that are set to benefit from increased adoption of technology, such as Uber, Salesforce, and Adobe – all of which are integrating AI into their operations. Meanwhile, the Global X US 100 ETF (ASX: N100) offers even broader exposure by investing in 100 of the largest non-financial companies listed on the US market. Many of the large-cap companies in N100 also feature in FANG, mentioned above, but N100 provides more diversification with a bigger basket of stocks.

How to Invest in AI

AI is here to stay and poses an attractive investment opportunity for those looking to expand the growth-focused allocation in their portfolio. There are numerous ways to gain exposure to this worldwide, industry-agnostic megatrend and ETFs are a useful tool to make doing so most simple and cost-effective.

AI is still an emerging technology, so investing in the space may involve risk. ETFs that aim to invest in the thematic can be exposed to these concerns. As with all investments, read the relevant PDS and TMD to assess fund-specific risks.

Explore the Global X Range of Beyond Ordinary ETFs.


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