Are you thinking about investing in artificial intelligence (AI)? You’re not alone. AI is changing the world fast, and Canadian investors are looking for ways to get in. But picking the right stocks can be tough. That’s where AI exchange-traded funds (ETFs) come in. These funds give you a way to invest in the AI sector without having to choose individual companies. So, which AI ETFs are the best for Canadian investors in October 2024? Let’s break it down.
Why Are AI ETFs Popular?
AI has been a hot topic for a while now, especially with big tech companies like Nvidia, Microsoft, and Meta making huge moves in the space.
Nvidia, for example, saw its stock price soar by 171% in 2024. This growth is mostly thanks to its AI-focused technology, like the graphics processing units (GPUs) that power many AI systems.
But investing in one company is risky. Even big names like Microsoft or Nvidia can face challenges. That’s where AI ETFs come into play.
They spread your money across a bunch of companies, lowering your risk. Instead of betting everything on one stock, you get a piece of many AI-driven businesses. Now, let’s look at what AI ETFs actually are and why they might be a good choice for your portfolio.
What Exactly Are AI ETFs?
An AI ETF is basically a group of stocks from companies involved in AI, robotics, or similar tech fields. These companies can be divided into three categories:
- Enablers: These companies make the tech that powers AI. Nvidia, for example, makes GPUs that AI systems rely on.
- Engagers: These companies use AI in their products. Microsoft is a great example—it uses AI to improve its software and make work easier for businesses.
- Enhancers: These companies use AI to improve what they already do. For example, Intuitive Surgical uses AI in its robotic surgery systems to make surgeries safer and more effective.
When you invest in an AI ETF, you get exposure to all three types of companies. This way, you’re not stuck depending on just one sector or company.
Top AI ETFs for Canadian Investors in 2024
So, what are the best AI ETFs in Canada right now? Let’s take a look at some of the top choices.
- CI Global Artificial Intelligence ETF (CIAI)
- Management Fee: 0.20%
- Style: Actively managed
- Overview: CIAI launched in May 2024 and has already grown to over $500 million in assets. It has a low management fee compared to other active funds. Top holdings include big players like Nvidia, Microsoft, Meta, and Alphabet. If you want an AI-focused fund with low fees, this could be a solid pick.
- Invesco Morningstar Global Next Gen AI Index ETF (INAI)
- Management Fee: 0.35%
- Style: Passively managed
- Overview: INAI tracks an index of companies involved in AI development. It includes companies from multiple sectors like tech, semiconductors, and data infrastructure. It’s also available in a Canadian dollar-hedged version, which helps protect against currency swings.
- Evolve Artificial Intelligence Fund (ARTI)
- Management Fee: 0.60%
- Style: Actively managed
- Overview: ARTI is managed using an AI-powered system called Boosted.ai, which helps select stocks. It has similar top holdings to CIAI but is more expensive, with fewer assets under management. It’s for investors who want something a bit more high-tech when it comes to stock selection.
- Global X Artificial Intelligence & Technology Index ETF (AIGO)
- Management Fee: 0.49%
- Style: Passively managed
- Overview: AIGO tracks companies involved in both AI and big data. It’s not currency hedged but offers exposure to tech giants like Nvidia, Qualcomm, and Meta. This ETF is a good pick if you want a broader range of tech companies, not just AI.
- Global X Robotics & AI Index ETF (RBOT)
- Management Fee: 0.45%
- Style: Passively managed
- Overview: RBOT focuses on both AI and robotics. It includes companies like Intuitive Surgical, which uses AI in medical robotics, and Yaskawa Electric, which is involved in industrial robotics. If you’re interested in the robotics side of AI, this could be the ETF for you.
Pros and Cons
Before you jump in, it’s important to understand both the good and the bad about AI ETFs.
Pros:
- Diversified Exposure: With an AI ETF, you don’t have to worry about picking the right individual stocks. Instead, you get a mix of companies, which lowers your risk.
- Easy to Understand: ETFs are pretty straightforward. Most of them are transparent, meaning you can see the list of companies they hold at any time.
- Tax Efficiency: Like other ETFs, AI ETFs are generally more tax-efficient than mutual funds. This could save you some money in the long run.
Cons:
- Volatility: The AI sector is growing fast, but it’s also volatile. AI ETFs can see big price swings because they’re concentrated in tech, a sector known for ups and downs.
- Higher Fees: Some AI ETFs charge higher fees, especially if they’re actively managed. That means part of your returns could be eaten up by costs.
- Limited Canadian Exposure: Many AI ETFs focus on US companies, with little to no Canadian representation. If you want Canadian AI exposure, you might need to look elsewhere or combine an ETF with other investments.
Should You Invest in AI ETFs?
So, should you invest in AI ETFs? It depends on your goals. AI is clearly a fast-growing field, and ETFs are a good way to invest without having to bet on one company.
If you believe AI will continue to change the world, AI ETFs can offer you a simple way to get exposure to this trend.
But remember, AI is still a developing industry. There’s plenty of excitement, but also a lot of uncertainty. Regulations, competition, and technology changes can all impact the sector.
If you’re comfortable with some risk and believe in the long-term growth of AI, then AI ETFs could be a smart move.
Time to Act
If you’re ready to dive into the AI world, now could be a great time. AI ETFs offer a way to invest in this booming sector without having to pick the right stocks yourself. Just make sure you do your homework and pick an ETF that aligns with your investment goals.
Whether it’s the lower fees of CIAI or the broad tech exposure of AIGO, there’s an AI ETF for every type of investor. Take a look at these options, weigh the pros and cons, and consider how AI ETFs could fit into your portfolio. Ready to take the next step? Now is the time to explore the future of AI investing.