A Complete Guide to Investing in AI ETFs

TradingKey - People may not realize how deeply AI is embedded in their everyday lives.

It's what creates the algorithm that orders your Netflix suggestions, streamlines shipping on Amazon, and powers the brain behind many of the apps on your phone. For anyone who has had the chance to use ChatGPT, one of the highly publicized AI chatbots created by OpenAI that can provide answers to complex questions and generate code in real-time, you have gained a glimpse into what has been called the "next generation" of AI - generative AI. 

Other large companies like Alphabet (formerly Google) have accelerated investment towards this area, creating competing generative AI technologies such as Gemini (Alphabet's product), and Meta Platforms' (formerly Facebook) offering called Meta AI, of which 

For those who would like to participate in investing in this technology without having to choose specific stocks, AI ETFs offer a straightforward path by combining a portfolio of companies involved in or creating generative AI technology into a single investment option.

AI ETFs vary notably. 

While many funds are strictly technology-focused (e.g., those with the leading semiconductor and/or cloud platform companies), some funds emphasize the "physical" aspect of intelligence - i.e., industrial robots, autonomous systems (including factory floor and warehouse robotics), factory sensors and testing equipment, robotics tooling and maintenance, etc. 

Many ETFs emphasize small-cap stocks for early-stage growth, and ETFs that invest primarily in mega-cap stocks. Investors may also wish to consider investing in semiconductor sector ETFs or in other high-tech applications closely related to AI.

AI-focused ETFs heavily rely on the overall conditions of the marketplace they invest in and can perform extraordinarily well only when specific characteristics exist. Three of the more critical elements to cause an AI-focused ETF to rally include, but are not limited to, the development of new technology, strong government support of developing technology (like Artificial Intelligence), and rapid growth in technology adoption (i.e. increasing demand for AI-powered products and services).

For example, for the 2025 upgrade cycle of the AI Hardware upgrade cycle, the BOTZ ETF, which includes major holdings such as nvidia and Keyence, has performed very well in year-over-year return outperforming the S&P 500 by about 5 percent.

Furthermore, as in any industry with an implied "winner-takes-all" profile, as the top companies in the industry grow ever more profitable, the benefits of this will flow to all parts of the supply chain, from developers to manufacturers to end-users. 

In this atmosphere of rapid growth and change, AI ETFs provide diversified exposure to the growth of the AI-focused companies without exposing the investor to stock-picking risk while allowing the investor to share in the overall (beta) growth of this rapidly expanding technology market.

Hidden Constraints on Returns

AI ETFs certainly have potential - however, many factors may limit their future returns:

• Valuation Risk 

A significant number of AI companies trade at historically high prices. As the market cools, so too will these companies erode your AI ETF's long-term performance.

• Diversification Drag 

Not all AI ETFs are created equally; in particular, very concentrated portfolios like those found in BOTZ have done well when the market is heavily interested in hardware or chips, but BOTZ may struggle during times when AI usage shifts away from hardware towards software/applications, whereas IRBO has experienced lower volatility but also a lower return due to a lack of sector specificity.

• Long-Term Uncertainty 

The pace of innovation within the AI space is extremely fast; only ETFs that actively follow the progress of this innovation can provide long-term return potential. Holding just one AI ETF for a long period of time will introduce you to the risk of that ETF becoming obsolete as the technology progresses past the marketplace in which it operates. 

Although AI-related themes offer strong long-term growth potential, investing in AI ETFs is not without risks. Investors should carefully assess the following key risk factors:

• High Valuation Volatility

Very high expectations of growth typically characterize the AI sector; it typically has much higher levels of valuation than any other sector. However, if market sentiment changes or macroeconomic conditions decline, then valuation compression can occur quickly and diminish the value of an investment.

• Structural Risks from Rapid Technological Evolution

The pace of innovation in the AI sector is remarkable; the foundational technology and leading application areas for AI have the potential to change quickly, and if ETFs investing in this space do not adapt their portfolios accordingly and remain relevant, then investors run the risk of owning outdated or underperforming assets.

• Significant Variation in ETF Strategies

The distinguishing features of AI ETFs are primarily represented by differences in terms of the industry focus, allocation methodology, and geographic exposure of the ETF. Should the thematic tracking and portfolio be misaligned or excessively concentrated, there would be the risk of a divergence between risk exposure and the intended growth trajectory of the AI sector.

• Policy and Regulatory Uncertainty

AI is an incredibly important and scrutinized sector, and thus, AI ETFs are subject to the changes in government policy and regulations, as well as international trade. Several factors, such as data privacy laws, export control laws, and geopolitical tensions among countries, could create uncertainty for investors in key areas of the AI supply chain and decrease the potential long-term return of AI ETF investments.

• Cyclical Nature of Industry Momentum

Growth in the AI sector tends to occur in cycles, as it is driven by breakthroughs in technology and spikes in demand by customers. During periods of slower demand or down-cycles, overall momentum may weaken and limit the long-term growth potential of investments in AI ETFs.

Investors constructing portfolios for the New Year have realised that the strength of the S&P 500 in 2025 largely stemmed from the artificial intelligence sector. So, when investors missed the boat on many of the large tech players like Nvidia and Palantir, they generally underperformed the S&P 500. However, the introduction of AI-focused ETFs provided a much simpler way for such investors to play catch-up.With dozens of AI-themed ETFs available, choosing the right one depends on your investment goal, risk appetite, and portfolio strategy. Here are some of the top picks to consider in 2026.

Global X Artificial Intelligence and Technology ETF

AIQ is an investment vehicle launched in 2018 that will invest in those companies that are expected to benefit from the development of artificial intelligence (AI), as well as the associated hardware used to support it. As a result, Global X expects that the global AI market will grow from $184 billion in 2024 to $826.7 billion by 2030, giving AIQ a long way to go in terms of investing in this type of company. The ETF held 86 positions at the end of 2025, and almost one-third of its value was in the top 10 holdings.

Global X Robotics and Artificial Intelligence ETF

BOTZ has been a fund since 2016 that focuses primarily on robotics within the AI investment sector. BOTZ invests in companies that will benefit from increased automation, robotic, and autonomous vehicle technology. In 2022, the Global X research firm estimated that the robotics industry was approximately $80 billion in size, growing to $280 billion by 2032. As of late 2025, the BOTZ portfolio includes 52 individual stocks with approximately 40% of the stock price weighted towards five stocks that are viewed as market leaders.

Since its inception, the performance of BOTZ has lagged behind the performance of the S&P 500 Index, and it suffered significantly during the widespread tech stock downturn in late 2022 but recovered afterward. As of January 2026, BOTZ has a relatively low dividend yield of 0.23%, is considered a growth-oriented fund, has a higher cost of approximately 0.68% and is actively managed.

Robo Global Robotics and Automation Index ETF

ROBO is a fund that invests in various companies related to robotics, automation and artificial intelligence (AI) technology. The fund's investments are diversified amongst a wide variety of sectors with no single holding representing more than 2.5% of the total fund. The top five holdings make up roughly 10% of the total owned assets. 

The fund has approximately 77 stocks as of the end of 2025, which include many well-known companies, such as FANUC, Intuitive Surgical, Teradyne, Ondas Holdings and Symbotic, among others. 

Since its inception in 2013, the fund has underperformed against the S&P 500 in total returns. Currently, ROBO has an annual yield of approximately 0.45% with an expense ratio of 0.95%.

iShares Future AI and Tech ETF

ARTY is an ETF that follows an index of Companies involved with Artificial Intelligence and Robotics (AI) in both Developed and Emerging markets. ARTY was established in 2018 and has almost $2.1 billion in Net Assets. The fund contains 49 stocks, which provide exposure to multiple company sizes, including those of smaller companies with strong potential for growth. 

As of late 2025, approximately 25% of ARTY's total assets were held in just 5 positions, which were comprised of Nvidia, Micron, AMD, TSMC, and Naver.

ARTY will focus on investing heavily in businesses primarily engaged in producing Data Center Infrastructure and Area Chips. ARTY has a 0.47% Expense Ratio and produced a return that outperformed both the S&P 500 and after fees, the return for the year was approximately 28%.

First Trust Nasdaq Artificial Intelligence and Robotics ETF

The Nasdaq CTA AI and Robotics Index includes firms in the AI and robotic space. The expense ratio is low at just 0.65%.

As of 2026, 110 companies were included in the fund holding. The leading figures in the company include Fanuc, Ocado Group, UiPath, Serve Robotics, and Synopsys.

Roundhill CHAT

Roundhill's investment strategy focuses entirely on the companies that provide the infrastructure, platforms, and software for artificial intelligence (AI). The Roundhill fund's investment strategy is managed and allows for the adjustment of holdings for optimal returns. 

The fund consists of 49 stocks at present, with 5 of those stocks containing 26.7% of the entire fund's assets. On December 21, 2025, Alphabet weighted 7.53%, Nvidia had 6.11%, Microsoft had 5.13%, Meta Platforms had 4.28%, and Palantir weighted 3.67%. In 2025, these average earnings from those 5 companies were 56%, which contributed to a nearly 47% year-to-date increase in ETF value. In comparison, the S&P 500's year-to-date total return was 17%. A

While this invested strategy involves greater expense than other Strategically Managed Index Funds (which typically charge an expense ratio of 0.03%), due to the increased management costs associated with actively managed strategies, it has been a highly successful strategy since it was first launched in 2023.

Many investors find AI ETFs appealing because they allow for broad exposure to the many companies involved in AI without having to do all the work of researching and monitoring individual stock holdings. 

For example, the largest AI ETF, the Global X AIQ fund, has historically produced a better return than the S&P 500 Index, and AI ETFs can provide access to niche robotics stocks and non-U.S. stocks that many investors may never have known about otherwise.

However, there are some downsides to investing in AI ETFs vs. investing in individual stocks. 

For instance, most of the currently available AI ETFs have underperformed vs. the S&P 500 index recently anyway, and on average, the costs associated with investing in an AI ETF are higher than those associated with investing in a traditional index fund. 

Furthermore, some of the leading AI stock performers, such as Nvidia, are not included or weighted heavily in all AI ETFs.

Though evaluating AI ETFs begins with performance, the broader context provides additional information beyond merely performance. Prior performance may indicate potential superior management or investment exposure, however, prior performance alone does not tell you everything. 

Evaluate the top holdings in each ETF to quickly see the stocks in which the fund has placed the largest investments. 

Make sure you understand how the ETF manages its portfolio. Some active ETFs will sell positions that tend to underperform and purchase larger positions in emerging companies, while many index ETFs have a fixed set of rules governing the investment process for both types of funds. 

Evaluate the expense ratios of different ETFs because these will vary. 

Lastly, if receiving income is important to you, then consider the dividend yields, which will provide some offset during periods of lower growth.

You can look at each fund's assets and determine how many of them are actually "AI companies" or "adjacent plays".  

Expense ratios, dividend yields, and historical returns are also important factors to consider for each fund. Many investors choose to buy the entire collection of core funds to provide the most extensive diversification possible.  

Although the long-term outlook for AI continues to be strong, the AI sector continues to grow, with new uses emerging every day. And the market for AI is expected to reach hundreds of billions of dollars while providing many tangible benefits in areas such as facial recognition, predictive search engines, smart homes, and driverless vehicles.

If you are a long-term investor and have a higher risk tolerance, if you would rather own one diversified position than try to put together a portfolio of ten or twenty stocks, if you value the benefits of investing in an ETF, and if you would like to have broad exposure to AI-related securities, these funds are a good fit for you.

It's no longer necessary for investors to speculate about who the next big player in AI will be because AI has moved out of the realm of theory and into practice. 

You can now invest in AI via exchange-traded funds (ETFs) specifically designed for your investment objectives, expense ratios, and risk tolerance. A diversified portfolio can provide access today to both the current leaders in AI and the future innovators in this space, all while having the benefits of diversification, investment expense ratio control, and a balanced investment across software, chips, and robotics.