Artificial intelligence and robotics remain among the most popular investment themes on the market. The problem is that a lot of investors approach them the wrong way. Rather than trying to identify the next moonshot startup before everyone else, I generally prefer using thematic ETFs.
Even though thematic ETFs have their flaws, they still provide some diversification and reduce the risk that comes from betting everything on a single stock. That said, investors should still be selective. Many thematic ETFs charge high fees, launch near the peak of a hype cycle, and end up holding little more than an expensive basket of the same technology stocks you could already own through a broad market ETF.
Still, a handful of AI-focused ETFs have proven themselves to be reasonably constructed and worthy of consideration. If I had $10,000 to allocate toward the theme today, these are two funds I would look at: one low-cost passive option and one actively managed fund.
Xtrackers Artificial Intelligence and Big Data ETF
The first ETF is the Xtrackers Artificial Intelligence and Big Data ETF (XAIX). Unlike many thematic funds that simply screen companies based on current AI-related revenue, XAIX attempts to identify firms actively developing AI technologies.
The process begins with a universe of more than 1,700 companies. From there, the index uses a proprietary patent-based screening process to identify businesses engaged in areas such as deep learning, natural language processing, image and speech recognition, cloud infrastructure, cybersecurity, and big data analytics.
The index then assigns an intensity score based on how extensively companies participate in these fields. The goal is to identify firms demonstrating meaningful research and development activity rather than simply benefiting from current AI enthusiasm.
What I like most about XAIX is that it remains relatively affordable. The ETF charges a 0.35% expense ratio, which is low for a thematic strategy. On a $10,000 investment, that translates into roughly $35 per year in fee drag.
Roundhill Generative AI & Technology ETF
For investors willing to pay more for active management, the Roundhill Generative AI & Technology ETF (CHAT) offers a very different approach. CHAT charges a 0.75% expense ratio, which is significantly higher than XAIX. However, the fund has delivered strong results since launch and has outperformed the Nasdaq-100 over parts of its operating history.
Unlike passive AI indexes, CHAT actively selects stocks using a proprietary methodology. The process combines a transcript score and sector score to evaluate relevance to generative AI, factoring in their market cap, liquidity, revenue, profit and R&D investment in AI technologies.
In practice, this creates a concentrated portfolio heavily tilted toward the companies currently driving AI adoption and infrastructure spending. Investors should expect substantial exposure to many of the Magnificent Seven names, along with other firms benefiting from the AI ecosystem.
The concentrated nature of the portfolio can be a double-edged sword. When AI leadership remains narrow and dominated by a handful of companies, CHAT can outperform. If leadership broadens or sentiment shifts away from AI, that concentration can also amplify volatility.
The Bottom Line
If I were building a $10,000 AI allocation today, I would probably start with XAIX as the core position. Its patent-driven methodology, broad diversification, and lower fee structure make it an attractive long-term holding.
CHAT, meanwhile, is the higher-conviction option. You pay more, but you also get active management and a concentrated portfolio designed to capture the companies most directly tied to the generative AI boom.
Neither ETF is guaranteed to outperform, but both offer a more disciplined approach than trying to guess which individual AI stock will become the next big winner.
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