Most individual AI stocks are trading at a very high premium valuation. Most of them have significant downside risk if something goes wrong, as evidenced by Palantir (NASDAQ:PLTR) falling recently and Nvidia (NASDAQ:NVDA) declining last month during the DeepSeek spook.
However, buying some AI ETFs alongside your favorite AI stocks can save you from a lot of that volatility. You’ll gain exposure to the broader AI industry and its potential success while spreading your risk across multiple sectors and companies.
The AI sector’s breadth means a “black swan event” is more likely to impact a specific segment rather than the entire field. Again, DeepSeek took down NVDA significantly, but many AI stocks kept climbing.
These three AI ETFs can help you avoid getting caught up in such a black swan event and at the same time, not miss out on the gains:
24/7 Wall St. Key Points:
- These AI ETFs could help you gain exposure to the artificial intelligence rally.
- At the same time, the diversification of these ETFs can save you from the increasingly frequent corrections in individual AI stocks.
- All of these AI ETFs have outperformed the S&P 500 in the past five years. Also, don’t forget to grab our free “The Next NVIDIA” report. It includes a software stock with 10X potential.
Global X Artificial Intelligence & Technology ETF (AIQ)
Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) is one of the most popular AI ETFs out there, and it is popular for a good reason. The ETF has delivered 118.7% in gains in the past five years, which outpaced the S&P 500’s 83.3% gain during the same time frame. The ETF went live in 2018 and has $3.3 billion in net assets. The total expense ratio of 0.68% makes it a pretty expensive ETF. Passively managed ETFs usually have a lower expense ratio, so you’re paying an AI premium here.
The investment approach here is quite compelling since it focuses on companies that either make AI technology or use it significantly. These days, every other tech company is considered an AI company, but they seldom develop AI or use it meaningfully. However, this ETF aims to give real exposure to AI.
It has 85 holdings and its top 10 holdings make up 37.24% of its total assets. The top 10 holdings are as follows:
- Tesla (NASDAQ:TSLA): 4.41% of assets.
- Netflix (NASDAQ:NFLX): 4.1% of assets.
- Meta Platforms (NASDAQ:META): 3.79% of assets.
- IBM (NYSE:IBM): 3.73% of assets.
- Broadcom (NASDAQ:AVGO): 3.63% of assets.
- Salesforce (NYSE:CRM): 3.59% of assets.
- ServiceNow (NYSE:NOW): 3.58% of assets.
- Cisco Systems (NASDAQ:CSCO): 3.51% of assets.
- Alibaba (NYSE:BABA): 3.49% of assets.
- Amazon (NASDAQ:AMZN): 3.42% of assets.
ROBO Global Artificial Intelligence ETF (THNQ)
ROBO Global Artificial Intelligence ETF (NYSEARCA:THNQ) has also delivered triple-digit gains in the past five years and is up over 111% since May 2020. This ETF is even more tech-heavy and targets companies that derive a “significant portion” of their sales from AI. It holds 59 stocks in total and 72.48% of its holdings are in the tech sector. Its top 10 holdings constitute 23.65% of total assets and are as follows:
- Raspberry Pi Holdings (OTCMKTS:RPBPF): 2.86%
- Cloudflare (NYSE:NET): 2.67%
- Tempus AI (NASDAQ:TEM): 2.37%
- Abarella Inc (NASDAQ:AMBA): 2.36%
- Alibaba (NYSE:BABA): 2.35%
- Alphabet (NASDAQ:GOOGL): 2.30%
- Pure Storage (NYSE:PSTG): 2.20%
- Amazon (NASDAQ:AMZN): 2.18%
- Cyberark Software (NASDAQ:CYBR): 2.18%
- CrowdStrike Holdings (NASDAQ:CRWD): 2.17%
All of these companies are pretty big beneficiaries of the AI rally and benefit from the growth of AI. THNQ invests at least 80% of its assets in securities included in its benchmark index or depositary receipts representing those securities. It also rebalances quarterly to adjust its holdings.
The net expense ratio is the same as AIQ at 0.68%.
iShares Expanded Tech Sector ETF (IGM)
iShares Expanded Tech Sector ETF (NYSEARCA:IGM) tracks the S&P North American Expanded Technology Sector Index, which is up almost 139% in the past five years. It isn’t purely AI, but the top companies being tracked by this ETF are the frontrunners in the development of AI.
It has the most exposure to the Magnificent Seven stocks in this article, as the top 10 holdings of this company constitute 54.52% of its total assets and are as follows:
- Meta Platforms (NASDAQ:META): 9.27%
- Apple (NASDAQ:AAPL): 8.07%
- Microsoft (NASDAQ:MSFT): 7.83%
- Nvidia (NASDAQ:NVDA): 7.41%
- Broadcom (NASDAQ:AVGO): 5.50%
- Alphabet (NASDAQ:GOOGL): 4.95%
- Alphabet (NASDAQ:GOOG): 4.06%
- Netflix (NASDAQ:NFLX): 3.04%
- Salesforce (NYSE:CRM): 2.38%
- Oracle Corporation (NYSE:ORCL): 1.99%
I’d be more careful with this ETF as many of its top holdings are at nosebleed valuations. META, AAPL, MSFT, and NVDA constitute a third of its holdings, and all of these companies are at a crossroads if we look at recent Wall Street sentiment. Any mega-cap slowdown could hit this ETF particularly hard, and we are seeing some signs of that slowdown.
Regardless, it has been one of the highest-performing ETFs in the past few years due to the mega-cap exposure here. It’s the cheapest ETF on this list with an expense ratio of just 0.41%.
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