The revolution in artificial intelligence (AI) is gaining momentum, with both demand and investment in AI showing rapid and sustained growth. This surge is anticipated to provide significant investment opportunities.
To capture the benefits for portfolios, investors have options. They can select individual stocks, hoping these selections will yield long-term success, or they can invest in an artificial intelligence exchange-traded fund (ETF), ensuring exposure to major players within the AI industry.
One ETF deserving consideration is detailed below.
The potential of AI is being increasingly recognized across various sectors. While many people are familiar with daily AI tools, expert projections indicate that the industry is still in the early stages of expansion.
According to a report by global consultancy firm McKinsey, AI software and services could contribute as much as $22.9 trillion annually to the global economy by 2040. Generative AI alone might account for up to $4.4 trillion in economic impact, particularly through applications in software engineering and research and development.
These estimates cover diverse impacts, but even a glance at projected industry revenue reveals exciting investment potential. McKinsey’s low-end prediction anticipates AI software and services revenue growing from $85 billion in 2022 to $1.5 trillion by 2040, with the high-end forecast suggesting revenues could exceed $4 trillion by that year.
However, identifying long-term winners in a growing industry like AI can be challenging.
In terms of index funds tracking the AI industry, the Xtrackers Artificial Intelligence and Big Data ETF (XAIX -5.23%) stands out. This ETF encompasses nearly every major AI-exposed company, including Nvidia, a significant producer of GPUs for the industry, and Amazon, which operates extensive cloud networks crucial for AI services.
Additionally, the ETF includes companies that are major adopters of AI, such as Bank of America and AT&T. This provides coverage from both the demand and supply perspectives of AI.
Beyond holdings, cost is an important factor when choosing an index fund. Investigating an ETF’s expense ratio, which reflects the annual cost of owning it, is essential.
The Xtrackers Artificial Intelligence and Big Data ETF imposes an annual fee of 0.35%. While this is higher than many general market index ETFs like the S&P 500 (^GSPC -5.97%), it is relatively low compared to other AI ETFs, which often have expense ratios ranging from 0.47% to 0.75%, with some even higher.
With a competitive expense ratio and a comprehensive portfolio encompassing both AI demand and supply, the Xtrackers Artificial Intelligence and Big Data ETF is recommended for investors seeking to participate in the AI revolution without having to select individual stocks.
In related news, Bank of America is noted for its advertising partnership with Motley Fool Money. Additionally, John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, serves on The Motley Fool’s board of directors.
