The artificial intelligence (AI) revolution is just getting started. Both AI demand and investment is rising rapidly, with no end to that growth in sight. This could easily be one of the greatest investment opportunities of our lifetimes.
But how do you make sure your portfolio benefits? You could make a handful of individual stock picks, hoping that these are the businesses that win long term. Or, you can invest in an artificial intelligence ETF, giving you instant exposure to all the biggest names in AI.
Here’s a look at one AI ETF to consider.
These estimates for AI may shock you
Everyone knows that the market for artificial intelligence is taking off. Many of us use AI tools ourselves on a daily basis. But according to most estimates, the party is just getting started.
Consider a recent report from global consultancy firm McKinsey. The company’s analysts believe AI software and services could create up to $22.9 trillion in global economic value every year by 2040. Generative AI alone will contribute up to $4.4 trillion in economic impact through enterprise use cases like software engineering and R&D.
These numbers include a wide range of impacts, but even looking solely at industry revenue forecasts should get you excited about investing in the space. McKinsey’s low-end forecast sees AI Software and Services revenue growing from $85 billion in 2022 to $1.5 trillion by 2040. Its high-end forecast calls for AI industry revenue to surpass $4 trillion by 2040.
No matter how you slice it, AI will be a big deal. But as with any growth industry, it can be hard to pick the long-term winners.
This artificial intelligence ETF is the perfect choice
When it comes to index funds tracking the AI industry, Xtrackers Artificial Intelligence and Big Data ETF (XAIX -5.23%) is my top choice. There are two reasons for this.
First, this ETF includes nearly every major company exposed to AI today, like Nvidia, which produces most of the industry’s GPUs, and Amazon, which runs one of the largest cloud networks responsible for training and executing AI services.
But this ETF doesn’t just include companies that supply the AI industry. It also includes some major AI adopters like Bank of America and AT&T. This ETF covers you from both the AI demand side and the AI supply side.
But it’s not just an ETF’s holdings that matter. There’s also the consideration of cost. When choosing an index fund, make sure to check its expense ratio. This is how much an ETF charges you per year to own it.
The Xtrackers Artificial Intelligence and Big Data ETF charges 0.35% per year in fees. While that’s higher than many plain-vanilla ETFs that cover broader market indexes like the S&P 500 (^GSPC -5.97%), it’s among the lowest expense ratios for AI ETFs, many of which range between 0.47% to 0.75%, with some charging even more.
With a relatively low expense ratio and a broad basket of stocks exposed to both the demand and supply side of AI, the Xtrackers Artificial Intelligence and Big Data ETF is my top pick for investors looking to expose their portfolio to the AI revolution without needing to identify individual investments themselves.
Bank of America is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Bank of America, and Nvidia. The Motley Fool has a disclosure policy.