Exploring a Unique AI ETF for Investors Seeking Growth
For those hesitant about selecting individual stocks in the AI sector, you’re not alone. Out of nearly three dozen stocks I hold, only two could be classified strictly as “AI companies.” These, however, are merely part of broader businesses that could benefit from AI advancements.
Alternatively, you might consider investing in AI-focused ETFs. The challenge here is that many of these ETFs tend to rely heavily on a select few large tech firms.
Where to invest $1,000 right now? Our analyst team has identified what they consider the 10 best stocks to buy today. See the 10 stocks »
One noteworthy option is the Ark Autonomous Technology & Robotics ETF (NYSEMKT: ARKQ). Below, we explore its unique approach and rationale for investment.
An Innovative Perspective on AI Investments
Numerous ETFs focus on AI stocks, some of which are solid choices with manageable fees. However, the Ark Autonomous Technology & Robotics ETF stands out from the crowd.
Unlike typical index funds designed to reflect the performance of a stock index, Ark actively manages its investments. Portfolio managers, led by tech investor Cathie Wood, diligently select stocks aiming to outperform established AI indexes over time.
This strategy results in a more concentrated portfolio, encompassing just 35 stocks. Its holdings diverge significantly from those found in major AI index funds. For context, familiar names like Nvidia and Alphabet tend to dominate the latter.
Discover Lesser-Known AI Stocks
The top holding in the Ark ETF is familiar: Tesla (NASDAQ: TSLA). Yet, the remaining top five stocks include:
- Teradyne (NASDAQ: TER) – a robotics company with a market cap of $23 billion.
- Kratos Defense & Security (NASDAQ: KTOS) – a defense-oriented firm valued at just over $4 billion.
- Rocket Lab USA (NASDAQ: RKLB) – developing spacecraft with a market cap of $14 billion.
- Archer Aviation (NYSE: ACHR) – focused on electric aircraft, valued at about $4.8 billion.
These four stocks collectively have a market cap just exceeding 1% of Nvidia’s, yet the Ark ETF allocates over 31% of its assets to them.
Investing in Innovation at Reasonable Costs
The Ark Autonomous Technology & Robotics ETF is an excellent avenue for those interested in AI beyond the usual tech giants. It features significant investments in smaller and mid-sized companies with substantial growth potential.
While the ETF’s expense ratio of 0.75% is higher than that of a standard S&P 500 index fund, it remains competitive when compared to passive AI ETFs. An analysis of leading AI index funds revealed expense ratios ranging from 0.47% to 0.68%. Investing with Ark means benefitting from the insights of one of the industry’s most respected tech investors.
A Time-Sensitive Opportunity
Do you ever feel like you missed out on investing in top-performing stocks? If so, now may be an ideal time to consider new opportunities.
Our analysts occasionally issue “Double Down” stock recommendations for companies poised for growth. If you’re feeling the pressure of missing golden investment opportunities, this is a chance to act before prices climb. Historical performance indicates strong returns:
- Nvidia: A $1,000 investment since our 2009 recommendation would now be worth $363,307!*
- Apple: A $1,000 investment from our 2008 alert would amount to $45,963!*
- Netflix: Investing $1,000 when we doubled down in 2004 is now worth $471,880!*
Currently, we have “Double Down” alerts on three exceptional companies, and this moment could be fleeting.
See 3 “Double Down” stocks »
*Stock Advisor returns as of January 6, 2025
Randi Zuckerberg, formerly of Facebook, and Suzanne Frey from Alphabet, sit on The Motley Fool’s board. Matt Frankel has no positions in the stocks discussed. The Motley Fool recommends and holds positions in Alphabet, Arista Networks, Meta Platforms, Nvidia, and Tesla, and also recommends Broadcom, Rocket Lab USA, and Teradyne.
The views expressed here represent only those of the author and do not necessarily reflect the beliefs of Nasdaq, Inc.
