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3 AI-Focused ETFs for Passive Investment Strategies

AI is expected to experience significant growth over the next 7 years, presenting a valuable opportunity for passive investors. There are several top ETFs that provide pure-play exposure to AI without the associated risks. Three notable ETFs in this space are The Roundhill Generative AI & Technology ETF (NYSEARCA: CHAT), The Wisdom Tree Artificial Intelligence & Innovation ETF (BATS: WTAI), and The Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ). These ETFs offer broad exposure to the market, with a focus on both established blue-chip leaders and the small-cap companies driving innovation in the industry.

The AI industry is projected to be worth $100 billion by 2023, and it is expected to grow at a nearly 50% compound annual growth rate over the next decade. The outlook for AI is incredibly promising, with a projected 20X growth by 2030 driven by advancements in technology, infrastructure, and services. Among these segments, services will be the largest and fastest-growing, making blue-chip tech companies well-positioned to benefit in the long term.

Some key players in the AI industry include NVIDIA (NASDAQ: NVDA), Oracle (NASDAQ: ORCL), and Adobe (NASDAQ: ADBE). These companies have proven critical to the AI ecosystem, with Oracle providing fundamental IT infrastructure and data handling capabilities, Adobe offering a widely used interface and creative tools that generate valuable data, and NVIDIA being a dominant player in chip technology and AI services. NVIDIA, in particular, is expected to remain the leading pure-play AI stock for the foreseeable future due to its strong position in chip technology and its investment in AI tools and infrastructure for developers and applications across all levels.

The Roundhill Generative AI & Technology ETF primarily focuses on blue-chip names in the AI industry and has limited exposure to small-cap and start-up companies. While it is the smallest fund on this list, with less than $100 million in assets, its holdings provide solid exposure to leading AI companies. The top holdings of this ETF include NVIDIA, Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG), along with other significant players such as Baidu (NASDAQ: BIDU), Adobe, Marvell Technology (NASDAQ: MRVL), Meta (NASDAQ: META), and Advanced Micro Devices (NASDAQ: AMD). However, one risk of this ETF is its young age, as it has only been traded for a few months and its success relies on investor support.

The Wisdom Tree Artificial Intelligence & Innovation Fund, on the other hand, is a more established ETF that has been in existence for approximately 2 years. With around $145 million under management, this fund includes NVIDIA and Meta Platforms among its top holdings. The additional three companies in its top five are Alchip, a semiconductor company specializing in ASIC and SoC designs, IonQ (NYSE: IONQ), a quantum computing company, and Synopsys (NASDAQ: SNPS), a design automation firm for the semiconductor industry. Unlike the Roundhill Generative AI & Technology ETF, the Wisdom Tree fund offers a small dividend, which helps offset the associated fees.

The Global X Artificial Intelligence & Technology ETF is another option for investors seeking exposure to the AI sector. This ETF’s top 10 holdings include Alphabet, Amazon, Meta, Adobe, Intel, Oracle, and NVIDIA. These companies represent various aspects of AI, including technology, infrastructure, and services, with a particular emphasis on services and the long-term integration of AI into everyday life.

In summary, these AI-focused ETFs offer passive investors the opportunity to invest in a rapidly growing industry with substantial future potential. Each ETF has its unique composition and strategy, providing investors with different levels of exposure to blue-chip leaders and smaller, innovative companies. Investors should carefully consider the risks and advantages associated with each ETF before making investment decisions.

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