The artificial intelligence (AI) realm has taken the world by storm. Several companies have shifted their focus to developing AI technology (chatbots), semiconductor/chips, and hardware that support the ongoing AI wave. We used TipRanks’ ETFs Comparison tool for AI ETFs to compare First Trust Nasdaq Artificial Intelligence & Robotics ETF (ROBT), iShares Robotics and Artificial Intelligence Multisector ETF (IRBO), and Roundhill Generative AI & Technology ETF (CHAT) to determine the best AI ETF as per analysts’ ratings and price target appreciation. The ETF ratings and price targets are based on the consolidated ratings and price targets of each stock in the fund.
Interestingly, Nvidia (NASDAQ:NVDA) remains one of the dominant players in the AI market. Individual investors and hedge funds have been accumulating NVDA stock for the tremendous value the company offers in the AI space. Having said that, investors can gain exposure to diverse AI stocks by investing in AI ETFs (exchange-traded funds), thus avoiding the risk associated with holding a single stock. You never know when the next “Nvidia” could emerge from the lesser-known players.
AI ETFs are one of the best ways to benefit from the opportunities offered by the AI industry. They offer exposure to a broad set of AI-related companies without the hassle of researching and selecting individual stocks. Plus, they offer various features, including liquidity, like normal stocks.
TipRanks’ ETF Comparison Tool enables the comparison of ETFs based on several parameters, such as AUM (assets under management), funds flow, expense ratio, technicals, performance over different time periods, and TipRanks Essential tools.
First Trust Nasdaq Artificial Intelligence & Robotics ETF (ROBT)
The First Trust Nasdaq Artificial Intelligence & Robotics ETF seeks to track the performance of the Nasdaq CTA Artificial Intelligence & Robotics Index. The index has a unique methodology of including stocks of companies that must be classified as AI or robotics engagers, enablers, or enhancers, as per the CTA (Consumer Technology Association). Plus, each company must have a market cap of at least $250 million, alongside minimum average volume and daily dollar trading specifications.
As per the CTA, engagers are companies that design or deliver robotics and AI products. while enablers are companies that develop building block components for robotics or AI. Enhancers are companies providing value-added services within the sector. Engagers have a 60% representation in the index, while enablers and enhancers constitute 25% and 15%, respectively.
Notably, the ROBT has an expense ratio of 0.65%, while its dividend yield stands at 0.25%. As of June 24, ROBT had $517.34 million in assets under management (AUM). Its top three holdings include ServiceNow (NOW), Palantir Technologies (PLTR), and SentinelOne (S), totaling 5.96% of the portfolio.
Is ROBT a Buy or Sell?
On TipRanks, ROBT has a Moderate Buy consensus rating based on 71 Buys, 36 Holds, and one Sell rating. The average First Trust Nasdaq Artificial Intelligence & Robotics ETF price target of $52.72 implies 25.5% upside potential from current levels. Meanwhile, ROBT ETF has declined 5% so far in 2024.
iShares Robotics and Artificial Intelligence Multisector ETF (IRBO)
The iShares Robotics and Artificial Intelligence Multisector ETF aims to replicate the performance of the NYSE FactSet Global Robotics and Artificial Intelligence Index. The Index has an equal weight methodology to invest in both developed and emerging market equities from the AI and robotics space.
Importantly, the IRBO’s Board of Trustees has decided to change the underlying tracking index to Morningstar Global Artificial Intelligence Select Index, effective August 12, 2024. On the same date, the ETF will also change its fund name to iShares Future AI & Tech ETF while the fund’s ticker will change to “ARTY”.
The IRBO’s current dividend yield is 0.81%. Among the three ETFs discussed here, IRBO boasts the lowest expense ratio of 0.47%. As of June 21, IRBO’s AUM was $660.15 million with 110 holdings. The top three players, Nvidia, MicroStrategy (MSTR), and Arm Holdings (ARM), account for 7.27% of the ETF’s overall assets.
Is IRBO a Good ETF to Buy?
With 61 Buys, 46 Holds, and three Sell ratings, IRBO has a Moderate Buy consensus rating on TipRanks. The average iShares Robotics and Artificial Intelligence Multisector ETF price target of $39.44 implies 19.7% upside potential from current levels. Year-to-date, IRBO has lost over 2% of its value.
Roundhill Generative AI & Technology ETF (CHAT)
One of the recently launched ETFs, the Roundhill Generative AI & Technology ETF claims to be the world’s first ETF with a focus on generative AI. In contrast to the other two ETFs, CHAT is an actively managed ETF with no underlying tracking index. Owing to the actively managed status of the ETF, the managers charge a high expense ratio of 0.75%.
The fund’s thesis for investing in generative AI is built on the rapidly growing adoption of bots and the estimated TAM (total addressable market) projection of $121 billion in 2033. Moreover, CHAT believes that AI technologies will drive roughly $7 trillion in global economic growth by 2032.
Currently, CHAT has 52 companies in its portfolio with the top three companies contributing 20.28% of the total assets. These companies include Nvidia, Microsoft (MSFT), and Alphabet Class A (GOOGL). The AUM stands at $183.68 million.
Is CHAT a Good ETF to Buy?
CHAT has a Moderate Buy consensus rating on TipRanks, backed by 32 Buys and 20 Hold ratings. The average Roundhill Generative AI & Technology ETF price target of $42.80 implies 17.2% upside potential from current levels. Interestingly, CHAT has gained nearly 21% so far this year.
Concluding Thoughts
Analysts expect the ROBT or The First Trust Nasdaq Artificial Intelligence & Robotics ETF to offer the highest upside potential in the next twelve months among the three ETFs discussed above. The ROBT ETF’s underlying index follows a unique methodology of classifying AI-related stocks that gives a more comprehensive representation of the sector than the other two ETFs.
