Artificial intelligence is increasingly seen as a smart bet by exchange-traded fund providers, witness the variety of products of recent vintage seeking to cash in on this overarching trend involving AI, analytics and big data.
You can add another fund to that list with Tuesday’s launch of the Global X Future Analytics Tech ETF (AIQ), which is based on the Indxx Artificial Intelligence and Big Data Index composed of companies that produce vast amounts of data and develop proprietary AI systems to derive actionable insights from that data. AIQ also features companies that offer AI-as-a-Service (AIaaS) for big data analytics, or are developing hardware that’s key to powering AI systems such as quantum computing.
The fund’s investment thesis, according to its prospectus, is that artificial intelligence and big data are converging as complementary technology themes that allow companies to extract useful information from large and complex data sets. The proliferation of big data means greater need for artificial intelligence technology, which incentivizes companies to develop those capabilities.
Global X bills AIQ as unconstrained by sector, industry and geographic classifications. Companies eligible for inclusion in the index are ranked based on their exposure to the above-mentioned categories, and must receive a minimum score within a given category to be included in the modified cap-weighted index. The index holds 82 companies, and 25 percent or more of the fund’s total assets are tied to companies that provide exposure to the artificial intelligence and big data industry.
U.S.-listed companies make up more than 77 percent of the fund’s holdings, while information technology dominates from an industry perspective, at 81 percent of the fund. Internet software and services (24 percent), semiconductors (15 percent), application software (15 percent) and system software (13 percent) are the largest sub-industry sectors.
Baidu, Facebook, Nvidia, Alibaba and Qualcomm comprise the top five holdings. AIQ comes with an expense ratio of 0.68 percent.
AIQ is the seventh product in Global X’s thematic-technology suite. This includes the Global X Robotics & Artificial Intelligence ETF (BOTZ), which launched in September 2016 and is the company’s largest ETF with roughly $2.6 billion in assets. That fund gained 58 percent last year and is up 2.5 percent year-to-date. It has the same expense ratio as AIQ.
While ETF Database lists 15 funds in its artificial intelligence category, some of those are large, broader tech-focused funds such as the big three of Power Shares QQQ (QQQ), Technology Select Sector SPDR Fund (XLK) and Vanguard Information Technology ETF (VGT).
Some of the smaller, newer funds focused on the AI and analytics theme include the First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT), which launched in February and tracks the Nasdaq CTA Artificial Intelligence and Robotics Index developed by Nasdaq and the Consumer Technology Association.
BlackRock in March rolled out a suite of ETFs under the “iShares Evolved” brand. The funds pick their holdings in industries such as technology, innovative health care and media entertainment based on machine learning and natural language processing.