If you ask any investor, whether Australian or not, what the flavour of the month on the markets is right now, I'm sure the large majority would say ' artificial intelligence (AI) '. AI is the talk of the world right now. With commentators singing from the potential benefits of this powerful technology, to the possible dangers, and back to how it might enrich us through various stocks or exchange-traded funds (ETFs).
If you're bullish on this technology, you might want to know which is the best way to put your money where your mouth is. So today, let's go through what the best way to invest in AI might be here on the ASX.
Right off the bat, you might see a thematic ASX ETF with 'AI' in its name as the best port of call. The Global X Artificial Intelligence ETF (ASX: GXAI) is a great example. A fund of this nature will get you some of the world's most prominent and dominant AI stocks. For example, some top holdings of GXAI include Palantir Technologies, SpaceX, Microsoft Corporation, Meta Platforms and Tesla. Those are just some of this fund's (current) 88 holdings.
Another option might be the BetaShares NASDAQ 100 ETF (ASX: NDQ). Now, this ASX ETF doesn't have AI in its name or in its mission statement. However, the index that it tracks, the NASDAQ 100, naturally contains most of the leading AI stocks on the US markets. AI leaders like NVIDIA, Alphabet, Micron Technologies, Advanced Micro Devices, and Apple are all amongst its largest holdings. As are Meta Platforms, Microsoft, SpaceX, Palantir and Tesla.
Plus, you get some high-quality companies that aren't necessarily AI leaders thrown in too. That includes Amazon, Walmart, and Netflix.
Either (or both) of these ASX ETFs would give an ASX investor plenty of exposure to artificial intelligence, all in one place.
However, there is a cheaper option. See, neither of the two ASX ETFs named above are cheap, relatively speaking. The Global X Artificial Intelligence ETF charges an annual management fee of 0.57%. NDQ asks 0.48% per annum.
In contrast, a market-wide US index fund, such as the iShares S&P 500 ETF (ASX: IVV) asks just 0.04% per annum. That's a difference between paying $64 a year for every $10,000 invested and paying $4 a year for that same $10k. That may not sound like a lot, but it does add up if one is investing for long periods of time.
Sure, the iShares S&P 500 ETF doesn't invest in AI specifically. It is a lot more diversified than even the BetaShares Nasdaq 100 ETF. But it still offers exposure to many of the companies that are leading the AI race. Amongst its top holdings, you'll find Nvidia, Apple, Microsoft, Alphabet, Meta Platforms, Micron Technology, Tesla, and AMD.
To round up, all of these ASX ETFs will provide an investor with some level of exposure to some of the world's best AI stocks. If you want the purest, most direct AI investment, then the Global X Artificial Intelligence ETF is your best bet. But less-picky investors may want to consider the far cheaper, yet still AI-centred S&P 500 ETF.