There's been a lot of talk about AI or "Artificial Intelligence" lately, and we at Stack are excited! We’re using it for video subtitles, writing blog posts (yes, this one too, of course), and coding our app. It’s simply incredibly efficient! And we haven't even tapped into all the possibilities we see, both as a company and as individuals.
That’s why we got really excited when we discovered the exchange-traded fund (an ETF) from Xtrackers – the Artificial Intelligence & Big Data UCITS ETF. Naturally, we had to include it on our platform. So, even though we rarely add new funds, this one earned a spot in the tech category.
But what’s really the difference between investing in this vs. a regular tech ETF?
Strategy and Focus
The Xtrackers Artificial Intelligence & Big Data UCITS ETF is designed to give investors exposure to companies leading the way in artificial intelligence (AI) and big data. The ETF tracks an index that includes companies from around the world involved in the development or use of these technologies, including companies in the technology, communication, financial, and consumer sectors.
On the other hand, the Xtrackers MSCI World Information Technology UCITS ETF is designed to provide exposure to the global technology sector. The ETF follows an index that includes companies worldwide involved in the design, development, and distribution of technology hardware, software, and services. This makes it a broader and more diversified fund.
Content
As of March 2021, the Xtrackers Artificial Intelligence & Big Data UCITS ETF had approximately 82 companies in its portfolio, with the largest investments in NVIDIA, Meta (Facebook), and Apple. The Xtrackers MSCI World Information Technology UCITS ETF had around 180 companies in its portfolio, with the largest investments in Apple, Microsoft, and NVIDIA.
Returns
So far this year (28.04.23), the Xtrackers Artificial Intelligence & Big Data UCITS ETF has delivered a return of around 30%, while the Xtrackers MSCI World Information Technology UCITS ETF has delivered around 29%. Over the past 3 years, the broad tech index has delivered 17%, while the AI ETF has "only" delivered 14%. But past performance is no guarantee of future results, so it's hard to say which will perform better moving forward.
Fees
The Xtrackers Artificial Intelligence & Big Data UCITS ETF has an ongoing fee of 0.35%, while the Xtrackers MSCI World Information Technology UCITS ETF has an ongoing fee of 0.25%.
Diversification
Both ETFs offer a high degree of diversification across companies, but the Xtrackers MSCI World Information Technology UCITS ETF offers a slightly higher number of companies in its portfolio. Both are concentrated around the tech sector, including communication, while the AI ETF is somewhat more focused on pure tech.
Conclusion
Both ETFs give investors exposure to different segments of the technology sector, but the Xtrackers Artificial Intelligence & Big Data UCITS ETF offers a more focused approach to AI and big data, while the Xtrackers MSCI World Information Technology UCITS ETF provides broader exposure to the global technology sector.
Higher concentration can lead to greater volatility (aka higher risk), meaning both higher upsides and downsides.
So, even though I think AI is super cool and I believe in it, I still want to keep my broad exposure to tech, but I'll be adding a bit of AI ETF going forward because it’s so cool, and this technology is definitely here to stay.
What will you do?
