10 Best AI ETFs to Watch in Australia 2024

Artificial intelligence (AI) is not an unfamiliar term, but since Open AI launched its chatbot Chat GPT in 2022, AI has become a transformative force, being seen in industries as diverse as healthcare and finance. A report by Fortune Business Insights estimates that the total market value of AI will reach approximately $266.9 billion by 2027. The AI boom has transformed the financial investment landscape, attracting the attention of investors looking for the next big win. For investors looking to capitalise on this trend without exposing themselves to the risks of investing in individual companies, AI ETFs provide a diversified avenue for investment.

In this article, we'll explore what AI ETFs are, how to choose the best AI ETFs for your portfolio and identify the top 10 AI ETFs in 2024.

What are AI ETFs?

AI ETFs combine stocks of companies involved in artificial intelligence technology and package them together into a single basket, providing diversified investment opportunities in an industry that is at the forefront of technology. The following article will help you gain a deeper understanding of AI ETFs, delving into their features and potential benefits.

Distinctive features of AI ETFs

• Investment vehicle: Unlike direct investment in individual stocks, AI ETFs are a type of investment funds that invest in a diversified portfolio of stocks.

• Focused on AI: AI ETFs focus on cutting-edge companies active in the field of AI, including those involved in machine learning, robotics, Big Language Modeling, natural language processing (NLP), and more.

• Traded on an exchange: AI ETFs are traded on stock exchanges just like stocks, making it easier for investors to buy and sell throughout the trading day.

Advantages of AI ETFs

• Access to growth industries: The AI sector is experiencing rapid growth and presents a significant opportunity for investors, with AI ETFs offering an avenue for high growth potential.

• Lower costs: AI ETFs are passively managed, and compared to actively managed funds, they have lower expense ratios, which can lead to higher net returns.

• Transparency: The holdings of AI ETFs are publicly disclosed, allowing investors to monitor this information at any time via trading platforms and exchange offers.

• Diversification: Investing in a specific AI ETF allows investors to gain exposure to multiple companies, effectively diversifying the impact of any one company underperforming.

• Liquidity and flexibility: Investors have the flexibility to buy or sell AI ETFs at any point during the trading day, allowing them to adjust their positions as needed.

• Professional management: AI ETFs are managed by a professional management team with expertise and extensive experience in the field of AI. The identification of the management team enables investors to select quality AI ETF products.

How to choose the Best AI ETF?

In the world of AI ETFs, investors in Australia have a lot to choose from. While there's no specific recipe for picking the best AI stocks, investors can focus on the following metrics and trends.

ETF fundamentals

• Historical performance: Analyse the past performance of AI ETFs in different market conditions for a point of reference. While past performance is not a predictor of future results, it can help you assess risk tolerance and growth potential.

• Costs and fees: The costs of investing in AI ETFs include annual expense ratios, transaction fees, taxes and foreign exchange charges. Investors are well advised to consider these costs together in order to maximise long-term returns.

• Liquidity and Trading Volume: High liquidity makes it easy to buy and sell shares. Check trading volumes to confirm the ETF's popularity and stability in the market.

• Issuer: Consider the strength and reputation of the ETF issuer. A trustworthy issuer adds credibility and support to your investment.

Align your investment goals

Find AI ETFs that match your investment strategy. Whether you're looking for growth, income or a mix, AI ETFs that complement your financial goals can be the most effective.

Diversify risk

Diversification is the key to managing lower risk. Try to choose AI ETFs that offer a broad range of holdings across all sectors of the AI industry, which will minimise the impact of any one company's performance on your overall portfolio.

Keep track of industry trends

AI relies on constant technological advances, so it's important to keep up with the latest industry trends, including the introduction of new and emerging technologies, changes in technology and new challenges. In addition, privacy-related regulatory measures add to the complexity of investing. If you are considering adding a specific AI ETF product to your portfolio, make sure that it takes advantage of new opportunities and is not vulnerable to adverse regulatory actions.

By focusing on these key factors, Australian investors can effectively select the AI ETFs that best suit their needs, ensuring alignment with their investment objectives while effectively managing risk. Keep an eye on market trends and adjust your selection as needed to stay ahead of the evolving AI investment landscape.

10 Best AI ETFs to invest in Australia for 2024

In today's dynamic investment landscape, the 10 best performing AI ETFs for 2024 stand out as leading the industry and offering investors the potential of the booming AI sector. The ten top AI ETFs in the Australian domestic market and the U.S. equity market are presented below for your consideration.

Vanguard Information Technology ETF(VGT)

VGT's investment focus is on companies in the information technology sector of the U.S. market, with a majority of large-cap companies. This characteristic indicates that it is less volatile and represents a more value-oriented investment than other ETF products in the same sector that focuses on emerging technology companies.

• Yield: 0.67%

• Management fee: 0.09%

• Benchmark: MSCI US IMI/Info Tech 25-50 GR USD

• Issuer: Vanguard

• Listed Date: 2004

• Top 10 Holding:

• MSFT Microsoft

• AAPL APPLE

• NVNA NVIDIA

• AVGO Broadcom

• AMD Advanced Micro Devices

• ADBE Adobe

• CRM Salesforce

• ORCL Oracle

• QCOM Qualcomm

• AMAT Applied Materials

iShares U.S. Technology ETF(IYW)

IYW is one of the most representative technology ETFs in the U.S. stock market, offering investors a cost-effective avenue to gain exposure to the U.S. technology sector. The fund's most notable feature is its broad range of holdings, which includes over 150 securities.

• Yield: 0.33%

• Management fee: 0.4%

• Benchmark: Russell 1000 Tech RIC 22.5/45 Cap TR

• Issuer: iShares

• Listed Date: 2000

• Top 10 Holding:

• MSFT Microsoft

• AAPL Apple

• NVNA NVIDIA

• META　Meta　Platforms

• AVGO　Broadcom

• GooGL ALphabet-A

• AMD Advanced Micro Devices

• ADBE Adobe

• GooG ALphabet-A

• CRM Salesforce

Fidelity MSCI Information Technology Index ETF( FTEC)

ETEC aims to provide investors with investment returns that align with the performance of the MSCI US IMI Information Technology 25/50 Index and invests more than 80% of its assets in the securities included in its index. Its underlying indexes primarily represent the information technology sector, which is active in the U.S. equity market.

• Yield: 0.68%

• Management fee: 0.08%

• Benchmark: MSCI USA IMI/INFOR TECH 25-50 NR

• Issuer: Fidelity Investment

• Listed Date: 2013

• Top 10 Holding:

• AAPL Apple

• MSFT Microsoft

• NVNA NVIDIA

• AVGO Broadcom

• CRM Salesforce

• ADBE Adobe

• AMD Advanced Micro Devices

• ORCL Oracle

• QCOM Qualcomm

• ACN Accenture

Global X Robotics & AI ETF(BOTZ)

With a focus on companies that could benefit from the use of artificial intelligence (AI) and robotics, such as industrial robotics payrolls, automation companies, and automated driving car companies, among others, BOTZ is a popular AI fund that is competitive with ETFs on the same topic.

• Yield: 0.16%

• Management fee: 0.68%

• Issuer: global X funds

• Benchmark: Indxx global robotics & Artificial Intelligence thematic NR USD

• Listed Date: 2016

• Top 10 Holding:

• NVDA NVIDIA

• ABB Ltd

• ISRG Intuitive Surgical

• 6861 Keyence

• 6723 SMC

• 6973 SMC

• 6954 Fanuc

• CGNX Cognex

• DT Dynatrace

• 6506 YASKAWA Electric

• 6645 OMRON

ROBO Global Robotics&AUtomation ETF( ROBO)

ROBO invests in innovative global companies that are driving change in robotics, automation, and artificial intelligence (RAAI). At least 80% of this fund's total assets are invested in securities or depositary receipts representing its index.

• Yield: 0.05%

• Management fee: 0.95%

• Benchmark: ROBO Gbl Robotic&Automat TR USD

• Issuer: Robo Global

• Listed Date: 2013

• Top 10 Holding:

• NOVT Novanta

• ISRG Intuitive Surgical

• ZBRA Zebra Technologies

• ROK Rockwell Automation

• 6324 Harmonic Drive Systems

• NOW ServiceNow

• 6954 Fanuc

• TER Teradyne

• IPGP IPG Photonics

• IOT Samsara

iShares Robotics and Artificial Intelligence ETF(IRBO)

IRBO is an investment fund that tracks the performance and results of the NYSE FactSet Global Robotics and Artificial Intelligence Index. The index comprises companies from developed and emerging markets that are at the forefront of innovative technologies such as robotics and artificial intelligence.

• Yield: 0.85%

• Management fee: 0.47%

• Benchmark: NYSE FactSet Glb RobArtilntellige NR

• Issuer: iShares

• Listed Date: 2018

• Top 10 Holding:

• SIRI Sirius

• ARM Arm Holding

• GENI Genius Sports

• MOMO Hello Group

• YY JOYY

• CLVT Clarivate

• ADBE Adobe

• LUMN Lumen Technologies

• CGNX Cognex

• AAPL Apple

FT Nasdaq Artificial Intelligence & Robotics ETF(ROBT)

ROBT's investment results align with the pricing and returns of the NASDAQ CTA Artificial Intelligence and Robotics Index, which tracks the performance of AI and robotics companies engaged in technology, industrial, and other related sectors. The fund invests a minimum of 90% of its net assets in the common stock and depositary receipts of its focus companies.

• Yield: 0.27%

• Management fee: 0.65%

• Benchmark: Nasdaq CTA AI & Robotics TR USD

• Issuer: First Trust Advisors L.P.

• Listed Date: 2018

• Top 10 Holding:

• S SentinelOne

• PLTR Palantir

• APPN Appian

• Ocado Group PLC

• NOW ServiceNow

• PANW Palo Alto Networks

• ILMN Illumina

• UPST Upstart

• 7732 Topcon

• PEGA Pegasystems

BetaShares NASDAQ 100 ETF(NDQ)

NDQ tracks the performance of the Nasdaq 100 Index, which is comprised of the 100 largest non-financial companies by market capitalization on the Nasdaq Stock Market. The primary categories of these companies are technology companies and telecommunications companies.

• Yield: 2.2%

• Management fee: 0.38%

• Benchmark: NASDAQ 100 NR USD

• Issuer: BetaShare Capital Ltd

• Listed Date: 2015

• Top 10 Holding:

• MSFT Microsoft

• AAPL Apple

• NVDA NVIDIA

• AMZN Amazon

• AVGO Broadcom

• META Meta Platforms

• GOOGL Alphabet-A

• GOOG Alphabet-C

• COST Costco

• TSLA Tesla

Columbia Seligman Semiconductor & Tech ETF(SEMI)

SEMI tracks the price and earnings performance of the Solactive Global Semiconductor 30 Index, offering investment results that align closely with this benchmark. The fund’s investment strategy is focused on companies involved in the development and manufacture of semiconductors and semiconductor-related equipment.

• Yield: 0.77%

• Management fee: 0.75%

• Benchmark: PHLX Semiconductor Sector TR USD

• Issuer: The Bank of New York Mellon

• Listed Date: 2022

• Top 10 Holding:

• LRCX Lam Research

• AVGO Broadcom

• NVDA NVIDIA

• AMAT Applied Materials

• SMTC Semtech

• ADI Analog Devices

• KLAC KLA Corp

• NXPI Marvell Technology

• MRVL Marvell Technology

• ON ON Semiconductor

BetaShares Glb Rbtc & Artfcl Intlgc ETF(RBTZ)

RBTZ trades on the ASX and aims to provide investors with exposure to companies at the forefront of robotics and artificial intelligence technology in the global market, including industrial robotics, automation, machine learning, and related fields.

• Yield: 5.2%

• Management fee: 0.47%

• Benchmark: Indxx Global Robotics & AI TR USD

• Issuer: BetaShares Capital Ltd

• Listed Date: 2018

• Top 10 Holding:

• NVDA NVIDIA

• ABB Ltd

• ISRG Intuitive Surgical

• 6861 Keyence

• 6273 SMC

• 6954 Fanuc

• DT Dynatrace

• 6506 YASKAWA Electric

• CGNX Cognex

• 6645 OMRON

*Please note that the above data is as of July 25, 2024, and the ETF's AUM and market price may change over time. For the latest information, please refer to the trading platforms and exchanges.

Final thoughts on the best AI ETFs

AI has emerged as a prominent investment theme in 2024, with a notable surge in the seven leading U.S. tech stocks—Apple, Meta Platforms, Microsoft, Nvidia, Tesla, Amazon, and Alphabet—driving the S&P 500 Index and the Nasdaq to achieve the majority of their gains. Investor interest in the AI theme persists. Since July 11, 2024, the tech-dominated Nasdaq Composite Index (COMP: IND) has experienced a decline of approximately 7.1% over a two-week period. In a podcast interview, Meta's CEO, Mark Zuckerberg, cautioned that the current hype surrounding AI could potentially lead to overinvestment.

Additionally, Google CEO Sundar Pichai acknowledged the necessity for AI products to evolve further before reaching their full potential. As might be expected, AI offers both opportunities and challenges. As an Australian investor, choosing the best AI ETFs requires you to construct a portfolio that aligns with your investment objectives and risk tolerance. It is essential to monitor market trends and regularly reassess portfolios to ensure they remain aligned with the evolving landscape of AI investing.