Technology

The Top 6 ETFs for Robotics, Automation and Artificial Intelligence Have Vast Style Differences

Jon C. Ogg

Published: April 22, 2019 11:55 am

Last Updated: January 6, 2020 5:22 am

The world is rapidly changing. It wasn’t that long ago that mobile communications, nanotech, rare earth minerals, large-scale video games and social media were the hottest trends. That was then. Now the world’s next big technological advancements coming from robotics, artificial intelligence (AI) and machine learning, augmented and virtual reality, driverless vehicles, ever-changing data security and many other futuristic technology applications.

These future technology sectors already have started coming to life and offer massive growth potential over the coming decade or longer. Their nascent revenues today may grow into the tens of billions of dollars down the road. This is not just for the United States and the West either. These technology changes will have an impact on the developing world as well.

24/7 Wall St. has looked at many exchange-traded fund (ETF) trends for futurists over time. Many of the technology advances being made by the world’s top tech, industrial and other companies have only just started to see revenues in these long-term opportunities. That is why we are focusing on an ETF theme around robotics, automation, machine learning, AI and the surrounding fields that will benefit from this secular theme.

The United Nations suggests that the most recent population estimate of 7.6 billion people today will rise to more than 11 billion people by 2100. As the population grows, some of these future disrupting technologies are very likely to displace millions of jobs and make certain careers obsolete at basically the same time.

A fresh article from Forbes pointed out that some studies have predicted that as much as 40% to 50% of U.S. jobs could be automated in the next 20 years. Meanwhile, a paper issued by Deloitte in 2018 suggests that AI, robotics and automation are most effective in complementing the work of humans rather than replacing humans. This movement could be highly disruptive to the workforce, but this also can be seen as an opportunity by certain investors who track thematic and secular trends for massive growth potential.

In this review, we have looked over the universe of ETFs to see which offer the best opportunities for the years ahead. By focusing on an ETF rather than individual shares, investors can hope to catch sectors in this thematic investing strategy without taking on the risk that some of the speculative companies may implode. And implosion risk is more than just a risk. There are some highly valued and well-respected companies today that may find a day where they are also technologically obsolete and their value all but vanishes in a short time.

Large and small companies alike, both private and public, as well as governments and some individuals, have started using AI and machine learning to better manage their futures and to manage their existing businesses. But investors need to pay attention to the top holdings of each ETF to make sure that the future they are investing is really a focus of a company rather than just one of two dozen strategies. It’s easy to believe that a sector ETF only focuses on one theme, but that often is not the case.

24/7 Wall St. has used multiple data points for this ETF screen and review. Most data has been taken from the ETFdb.com website for fees and assets under management, while other data has been taken directly from each ETF manager’s website. Performance metrics for the year have been provided by Finviz.

24/7 Wall St.
With Micron and Qualcomm in the Bag, Semiconductor ETFs and Stocks Brace Hard for Earnings Season

ARK Industrial Innovation ETF (NYSEARCA: ARKQ) has traded since its inception in 2014. It invests in companies that are focused on and are expected to benefit substantially from advances in new products or services, technological improvements and advancements in scientific research. These themes include energy, automation and manufacturing, materials and transportation, and specific themes include autonomous transportation, robotics and automation, 3D printing, energy storage and space exploration.

That leaves a lot of themes on top of automation and robotics and AI and machine learning, but the fund’s website also showed that the ETF will be more concentrated in the industrial and information technology sectors. ARK also has an ETF with many overlaps called the ARK Innovation ETF (ARKK), and it is even larger with $1.6 billion in assets under management.

The industrial innovation ETF’s gain year to date was last seen at 19.7%, with $175 million in net assets under management and a 0.75% expense ratio. The ETF typically has 30 to 50 different stocks, and its top 10 holdings were as follows:

• Tesla (10.11%)
• Stratasys (10.01%)
• Nvidia (9.57%)
• Baidu (9.10%)
• Materialise (4.96%)
• Teradyne (4.53%)
• Proto Labs (4.18%)
• Aptiv (4.17%)
• Trimble (2.94%)
• Tencent (2.90%)

Global X Robotics & Artificial Intelligence ETF (NASDAQ: BOTZ) has been around since 2016, and it aims to track the Indxx Global Robotics & Artificial Intelligence Thematic Index. This fund targets companies that are expected to benefit from a higher adoption and utilization of robotics and AI, including those involved with industrial robotics and automation, nonindustrial robots and autonomous vehicles.

It was last seen to have $1.74 billion in assets under management. Its overall expense ratio is 0.68%, and it was last seen trading up 30% so far in 2019. The ETF’s top 10 holdings include many foreign-listed shares, with a high number listed in Japan:

• Intuitive Surgical (7.39%)
• Keyence (7.36%)
• Mitsubishi Electric (6.95%)
• ABB (6.48%)
• Fanuc (6.44%)
• Daifuku (5.93%)
• Omron (5.00%)
• SMC (4.98%)
• Nvidia (4.94%)
• Yaskawa Electric (4.71%)

iShares Robotics and Artificial Intelligence ETF (NYSEARCA: IRBO) was first created in June 2018, and it is looking to track the NYSE FactSet Global Robotics and Artificial Intelligence Index. This ETF is targeting developed and emerging market companies that could benefit from the long-term growth and innovation in robotics technologies and AI.

It was last seen to have $30.6 million in assets under management. The overall expense ratio is 0.47%, and it was last seen trading up about 27% so far in 2019. The ETF recently had a total of 87 holdings, with these top 10:

• Snap (1.82%)
• Cloudera (1.76%)
• Lattice Semiconductor (1.67%)
• MongoDB (1.59%)
• Momo (1.54%)
• Meitu (1.47%)
• Nemestchek (1.46%)
• Talend (1.41%)
• Xilinx (1.40%)
• MaxLinear (1.34%)

First Trust Nasdaq Artificial Intelligence and Robotics ETF (NASDAQ: ROBT) was originated in February 2018, and it aims to track the Nasdaq CTA Artificial Intelligence and Robotics Index. This ETF was designed to track the performance of companies engaged in the AI and robotics segments of the technology, industrial and other economic sectors.

It was last seen to have $39.7 million in assets under management. The overall expense ratio was 0.65%, and it was last seen trading up 29% so far in 2019. The ETF has a total of 95 holdings, and it has a rather different scale of companies in its top holdings than its peers. The top 10 holdings were last seen as follows:

• BlackBerry (2.16%)
• PKSHA Technology (2.12%)
• Synopsys (2.10%)
• Blue Prism (2.08%)
• Cadence Design Systems (2.06%)
• Ambarella (1.99%)
• OBIC (1.96%)
• Aveva (1.95%)
• Nice (1.93%)
• Ansys (1.91%)

Robo Global Robotics and Automation Index ETF (NYSEARCA: ROBO) has been around since late in 2013, and it seeks to track investment results that correspond generally to the price and yield performance of the ROBO Global Robotics and Automation Index.

It was last seen up over 28% so far in 2019 and was shown to have $1.47 billion in assets under management. It also has an expense ratio of 0.95%. This fund also has many companies based in and listed in Japan and elsewhere in Asia, many of which may be unheard of by most Americans. It most recently had 41 holdings, and the top 10 were last shown as follows:

• Daifuku (2.03%)
• Yaskawa Electric (2.01%)
• SMC (1.97%)
• Harmonic Drive Systems (1.95%)
• Nvidia (1.87%)
• Fanuc (1.86%)
• Zebra Technologies (1.81%)
• Omron (1.79%)
• Nabtesco (1.79%)
• Krones (1.78%)

24/7 Wall St.
How Buffett and Berkshire Hathaway Complicate Top Financial ETFs

Direxion Daily Robotics, Artificial Intelligence & Automation Index Bull 3X Shares (NYSEARCA: UBOT) uses leverage for intra-day tracking moves, and it was last seen up by about 107% so far in 2019 alone. The ETF seeks 300% of the daily performance of the Indxx Global Robotics and Artificial Intelligence Thematic Index, so it would in theory aim to have more or less the same holdings as the Global X Robotics & Artificial Intelligence ETF above.

The problem with leveraged funds of any sort, let alone three times, is that orders coming in and out can drastically alter the holdings on any given day. All leveraged ETFs tend to come with additional warnings of tracking errors, potential price decay and other special factors that are different than traditional ETFs.

This fund’s massive performance has not been hampered with a high expense ratio of 1.49%, and its assets under management of a mere $28 million may not reflect the true holdings at any point of a trading day, due to popularity of the leveraged ETFs varying greatly over time.

As you can see, there is no “one-size fits all” coverage universe for ETFs that want to profit from the explosive growth around the fields of robotics, AI and machine learning. Some sound almost identical, but the top holdings and the weightings of each inside the ETF have turned out to be entirely different. And this is also one of those instances in which an ETF’s expense ratio seems to have little correlation to relative performance so far in 2019.