We Analyzed the Top AI ETFs

Here’s What We Found

March 25, 2025

Hello Investor,

Artificial Intelligence isn’t just disrupting how we work — it’s now influencing how we invest. A growing number of ETFs claim to be AI-powered or AI-focused, promising smarter strategies and exposure to one of the most transformative technologies of our time.

But the question is:

Are AI ETFs a smart long-term investment — or just hype in a new wrapper?

Let’s break it down.

🧠 What Is an AI ETF?

AI ETFs generally fall into two buckets:

  1. AI-Driven ETFs


    → These use artificial intelligence to select and weight stocks, often adapting dynamically based on market data, sentiment, and other inputs.


    → Example: $AIEQ (AI Powered Equity ETF)

  2. AI-Themed ETFs


    → These track companies that are building or benefiting from AI, such as chipmakers, cloud providers, robotics firms, or software developers.


    → Examples: $BOTZ, $ROBO, $IRBO, $CHAT, $THNQ

🔍 Spotlight: $AIEQ – The First AI-Powered ETF

Launched by: ETF Managers Group + IBM Watson

Strategy: Uses natural language processing and machine learning to pick ~70–100 U.S. stocks with strong growth potential, updating daily.

Performance:

  • Has lagged the S&P 500 over the past 3 years.

  • More volatile than traditional ETFs due to rapid rebalancing.

Pros:

  • Real AI decision-making, not just a theme.

  • Dynamic allocation can adapt to changing market conditions.

Cons:

  • Lack of transparency in selection criteria ("black box").

  • Higher expense ratio (~0.75%) compared to passive ETFs.

🟨 Verdict: Interesting innovation, but best viewed as a satellite position, not a core holding.

🧠 AI-Themed ETFs: Investing in the Builders

These ETFs invest in companies driving the AI revolution — think Nvidia, Palantir, AMD, Amazon, and more.

Top Picks:

$BOTZ – Global X Robotics & Artificial Intelligence ETF

  • Focused on robotics, automation, and AI hardware.

  • Heavyweight exposure to semiconductor firms.

$IRBO – iShares Robotics & Artificial Intelligence ETF

  • More evenly weighted across large and mid-cap AI names.

  • Offers better diversification than BOTZ.

$THNQ – ROBO Global Artificial Intelligence ETF

  • Focuses on pure-play AI companies globally.

  • Includes firms in cloud, enterprise automation, and machine learning.

$CHAT – Roundhill Generative AI ETF

  • Focuses specifically on Generative AI exposure (e.g. NVIDIA, Meta, Alphabet).

  • A bit newer, but fast-growing AUM and interest.

📈 Common Holdings: Nvidia, Microsoft, Alphabet, Amazon — AI and tech megacaps.

✅ Should You Invest?

Pros of AI ETFs:

  • Easy exposure to a powerful, long-term theme.

  • Diversification across hardware, software, and platforms.

  • Many contain industry leaders in strong uptrends.

Risks to Consider:

  • Many AI stocks trade at high P/E multiples.

  • AI ETFs often overlap with tech-heavy ETFs like $QQQ or $VGT.

  • If AI enthusiasm cools, these may underperform cyclically.

🧭 How to Use AI ETFs in a Portfolio

  • Core Exposure?
    → No — most are too narrow or concentrated for core holdings.

  • Thematic Tilt?
    → Yes. Allocate 5–10% of a growth-oriented portfolio to capture AI upside.

  • Best for:
    → Long-term investors bullish on AI as a multi-decade trend.
    → Tech-focused portfolios looking to fine-tune exposure.

🔚Final Takeaway

AI ETFs are more than hype — but not all are created equal. If you're bullish on the rise of artificial intelligence, consider using AI-themed ETFs to ride the trend, while keeping risk in check through diversification and smart position sizing.

Stay informed, stay disciplined, and invest wisely.

Best regards,
StocksTrades.AI Newsletter

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.