Exploring a Unique AI ETF: Ark Autonomous Technology & Robotics

For those hesitant to pick individual stocks in the artificial intelligence (AI) sector, you're certainly not alone. With many stocks in my portfolio, only a couple can truly be labeled as "AI plays," and they’re not exact representations of pure AI companies. Instead, these are businesses that benefit from AI advancements.

If the thought of navigating individual AI stocks sounds overwhelming, consider investing through an ETF (exchange-traded fund). However, be aware that most AI ETFs often feature the same large-cap tech companies as their top holdings.

One standout in the AI ETF space is the Ark Autonomous Technology & Robotics ETF (ARKQ). This fund takes a different approach compared to many others, which makes it worthy of your attention.

A fresh perspective

There is an array of ETFs that focus on AI stocks, some of which are excellent choices with reasonable fees. Nevertheless, the Ark Autonomous Technology & Robotics ETF distinguishes itself.

This fund is not an index fund, which means it doesn’t aim to just replicate the performance of a particular AI stock index. Instead, it is actively managed, with its portfolio overseen by skilled managers, including renowned tech investor Cathie Wood. Their goal is to outperform standard AI benchmarks.

This active management approach results in a more focused portfolio, consisting of only 35 stocks. Interestingly, the stocks selected don’t resemble those typically found in major AI index funds. For example:

• The iShares Future AI & Tech ETF (ARTY) lists Broadcom (AVGO), Arista Networks (ANET), and Nvidia (NVDA) as its leading positions.
• The Invesco AI and Next Gen Software ETF (IGPT) includes Nvidia, Alphabet (GOOGL), and Meta Platforms (META) among its top three holdings.

These companies are familiar names in the tech world, particularly in the AI space. While they are all strong firms, investing in those provides exposure similar to a Nasdaq-100 index fund.

Discovering lesser-known AI stocks

While the leading holding in the Ark Autonomous Technology & Robotics ETF is Tesla (TSLA), which is widely recognized, the remaining top five holdings introduce you to some lesser-known companies:

• Teradyne (TER): A robotics company valued at around $23 billion.
• Kratos Defense & Security (KTOS): Focused on defense-related products and software, with a market cap just over $4 billion.
• Rocket Lab USA (RKLB): A company with a market cap of approximately $14 billion specializing in spacecraft development.
• Archer Aviation (ACHR): Valued at about $4.8 billion, developing electric vertical takeoff and landing aircraft.

In comparison, the combined market cap of these four stocks is only about 1% of Nvidia's value, yet the Ark ETF allocates more than 31% of its assets to them.

Affordable exposure to innovation

The key takeaway is that the Ark Autonomous Technology & Robotics ETF offers a unique way to invest in AI without focusing solely on the big-name tech companies. It features significant investments in smaller, innovative firms that might deliver exceptional returns.

Additionally, while the fund's expense ratio is 0.75%, which is higher than what you might find in standard S&P 500 index funds, it’s not significantly more than other passive AI ETFs, which range from 0.47% to 0.68%. So for a slightly higher cost, you gain access to a respected manager who is actively selecting promising AI investments.

AI, ETFs, Investing