Exploring Unique Investment Options in AI Technology
If picking individual stocks in AI tech feels overwhelming, you’re not alone. In the diverse mix of around three dozen stocks in my portfolio, only two could be classified as “AI plays.” Even those two are primarily businesses that stand to gain from AI advancements.
For investors looking for alternatives to individual stock purchases, exchange-traded funds (ETFs) present an option. However, the larger AI ETFs often lean heavily on well-known tech giants, limiting exposure to more innovative companies.
Where to invest $1,000 right now? Our analyst team recently identified the 10 best stocks for investment. See the 10 stocks »
A Unique Take on AI Investing
While numerous ETFs focus solely on AI stocks, some stand out as particularly strong investment choices. The Ark Autonomous Technology & Robotics ETF (NYSEMKT: ARKQ) uses a different strategy altogether.
This ETF is actively managed, rather than being an index fund that seeks to mirror the performance of a specific AI stock index. With prominent tech investor Cathie Wood at the helm, the fund aims for greater returns than benchmark AI indexes by analyzing and handpicking stocks.
As a result, ARKQ holds a more concentrated portfolio of only 35 stocks, and its selections diverge significantly from those found in larger AI index funds. For example:
Anyone familiar with the tech industry will find the differences striking, as most AI index funds feature major companies.
Companies like Nvidia, Alphabet, and Broadcom are undeniably strong players. Yet, investing in a Nasdaq-100 index fund could provide the same exposure without the extra steps.
Discovering Lesser-Known AI Stocks
The leading stock in the Ark ETF is Tesla (NASDAQ: TSLA), well-known among investors. However, the remainder of the top five comprises:
- Teradyne (NASDAQ: TER) – recognized for its $23 billion market cap in robotics.
- Kratos Defense & Security (NASDAQ: KTOS) – focusing on defense solutions, valued at about $4 billion.
- Rocket Lab USA (NASDAQ: RKLB) – a $14 billion company specializing in spacecraft technology.
- Archer Aviation (NYSE: ACHR) – with a market cap around $4.8 billion, this company works on Electric Vertical Takeoff and Landing (eVTOL) aircraft.
For context, these four combined have a market cap slightly over 1% of Nvidia’s. Yet, ARKQ has invested more than 31% of its assets in these companies.
Investing Smartly without High Costs
The main point to consider is that the Ark Autonomous Technology & Robotics ETF offers an excellent pathway to invest in AI without relying solely on well-known stocks. It has significant positions in innovative small- and mid-cap companies that show promising growth potential.
While the ETF’s expense ratio is 0.75%, which may seem steep compared to an S&P 500 index fund, it’s comparable to other passive AI ETFs. After analyzing popular AI index funds, I found their expense ratios ranging from 0.47% to 0.68%. For a bit more, you gain insights from one of the leading tech investors carefully curating AI investment opportunities.
Seize Your Chance for Potential Gains
Do you ever think you missed the opportunity to invest in top-performing stocks? It’s crucial to stay informed.
Our analysts occasionally present a “Double Down” stock recommendation for companies poised for significant growth. If you’re concerned you missed your chance, now may be the prime moment to invest. The statistics speak volumes:
- Nvidia: If you invested $1,000 in 2009, you’d see a return of $363,307!*
- Apple: Invested $1,000 in 2008 would have grown to $45,963!*
- Netflix: $1,000 invested in 2004 could have turned into $471,880!*
Currently, we are issuing “Double Down” alerts for three remarkable companies that might not present this kind of opportunity again soon.
See 3 “Double Down” stocks »
*Stock Advisor returns as of January 6, 2025
Randi Zuckerberg, a former director of market development at Facebook and sister of Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board. Suzanne Frey, an executive at Alphabet, is also on the board. Matt Frankel does not hold any positions in the mentioned stocks. The Motley Fool has investments in and recommends Alphabet, Arista Networks, Meta Platforms, Nvidia, and Tesla. The Motley Fool also advocates for Broadcom, Rocket Lab USA, and Teradyne. A disclosure policy is in effect.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
