Investing $1,000 in the Top Artificial Intelligence Exchange-Traded Fund (ETF) at Present
The AI market has gone bonkers in recent times. Propelled by significant progress in advanced language models (ALMs) and overall processing power, AI innovation is zooming ahead. Many experts believe we're currently experiencing the biggest technological shift since the advent of the internet.
Unfamiliar with how to leverage this long-term opportunity for your investment portfolio? The exchange-traded fund (ETF) below might just be your ticket.
This AI ETF is your ticket
Given the plethora of AI ETFs in the market, the Xtrackers Artificial Intelligence and Big Data ETF (XAIX 0.36%) stands out as a compelling choice. This ETF is linked to the Nasdaq Global Artificial Intelligence and Big Data Index, distinguishing itself through its innovative approach to AI investing. Unlike other funds and indices that add companies to their portfolios once they've been classified as AI-driven enterprises, this ETF identifies AI businesses before others even recognize their exposure to AI.
Inside this ETF's portfolio, you'll encounter AI stalwarts such as Nvidia and Oracle. But what's intriguing is the presence of companies that, despite not appearing to be directly related to AI, are integrating these technologies into their business models at such a rapid pace that they're significantly exposed to this generational technological shift. Bank of America, for instance, occupies the fourth-largest position with a portfolio weightage of 4.6%, almost on par with that of Nvidia.
So, what does Bank of America have to do with AI? Over the past few years, the bank has filed for hundreds of AI patents, amassing a portfolio of nearly 1,100 AI and machine learning patents. In the past year alone, Bank of America invested over $12 billion in technology, with nearly $4 billion directed towards AI initiatives. Given that other AI ETFs wouldn't consider Bank of America due to its reputation as a traditional bank, the Xtrackers Artificial Intelligence and Big Data ETF acknowledged the company's significant investments in AI, placing its bets on Bank of America being swept up in the AI wave more than most anticipate.
Bank of America isn't the only example of this in Xtrackers' portfolio. Adobe, Intuit, Verizon, Toronto-Dominion Bank - all are part of the Xtrackers portfolio, given more weightage due to their significant AI investments, anticipating that these initiatives will propel long-term growth that overshadows the competition.
Expanding the definition of which companies will profit from AI is the primary distinction between this AI ETF and its competitors. While other funds are focused solely on businesses developing and selling AI technologies, the Xtrackers ETF includes companies investing heavily in these technologies, betting that these investments will fuel sustained growth overtaking the competition.
However, before investing, there are a couple of factors to keep in mind.
Two factors to consider before buying this AI ETF
Always begin by scrutinizing an ETF's expense ratio. The Xtrackers Artificial Intelligence and Big Data ETF carries an expense ratio of 0.35%. Compared to other AI ETFs, this is slightly higher, but it's reasonable given the innovative edge it offers. For instance, the Invesco AI and Next Gen Software ETF charges 0.6% - nearly twice as much.
The other essential consideration is the stellar performance of this ETF. Since the turn of 2023, its value has more than doubled. While this is positive news for existing investors, new entrants should bear in mind that past performance does not guarantee future results. We are currently in the midst of an AI boom. While AI innovation, demand, and spending are expected to surge dramatically in the coming decade, rapid-growth sectors like this can occasionally become overvalued in the short term. At the bare minimum, expect the AI market to experiences volatility akin to other high-growth industries. If you opt for the Xtrackers Artificial Intelligence and Big Data ETF, ensure you have a long-term perspective and are comfortable embracing extreme volatility.
This AI ETF's innovative approach to investing also includes companies that heavily invest in AI, such as Bank of America, which has filed hundreds of AI patents and invested over $12 billion in technology in the past year.
When considering investing in the Xtrackers Artificial Intelligence and Big Data ETF, it's important to remember that while the ETF has a reasonable expense ratio of 0.35%, its high growth potential may also mean it experiences volatility akin to other high-growth industries.
%20at%20Present){kind=link}