Exploring the Ark Autonomous Technology & Robotics ETF: A Unique AI Investment Opportunity
Investing in artificial intelligence (AI) technology can be a daunting task, especially if you’re not keen on picking individual stocks. With a portfolio of about three dozen stocks, I can confidently say that only two of them are what I would consider “AI plays.” Even then, these aren’t pure AI investments but rather businesses that stand to benefit from AI advancements.
If you’re hesitant about selecting individual AI stocks, you might consider exchange-traded funds (ETFs) as an alternative. However, many AI-focused ETFs tend to have their largest holdings in the same mega-cap tech stocks, or a combination of a few big tech companies, which might not offer the diversification you’re looking for.
One ETF that stands out from the crowd is the Ark Autonomous Technology & Robotics ETF (ARKQ -2.49%). Let’s delve into what makes this ETF unique and why it might be worth your attention.
A Unique Investment Strategy
There are several exchange-traded funds focused on AI stocks, many of which are excellent investment products with reasonable fees. However, the Ark Autonomous Technology & Robotics ETF takes a different approach.
Unlike index funds that aim to match the performance of an AI stock index over time, Ark’s funds are actively managed. This means that portfolio managers, including the notable tech investor Cathie Wood, are actively analyzing and selecting stocks with the goal of outperforming benchmark AI indexes.
As a result, the ETF’s portfolio is more concentrated, consisting of just 35 stocks. Moreover, the list of stocks in this ETF doesn’t resemble those in major AI index funds. For instance:
- The iShares Future AI & Tech ETF (ARTY -0.58%) has Broadcom (AVGO -2.18%), Arista Networks (ANET -1.01%), and Nvidia (NVDA -3.00%) as its top three positions.
- The Invesco AI and Next Gen Software ETF (IGPT -1.53%) lists Nvidia, Alphabet (GOOGL -0.98%) (GOOG -1.14%), and Meta Platforms (META 0.84%) as its top holdings.
If you’re familiar with the technology sector, these names won’t surprise you. Most AI index funds are heavily weighted towards mega-cap players.
While companies like Nvidia, Alphabet, and Broadcom are undoubtedly impressive, you could gain significant exposure to them by simply investing in a Nasdaq-100 index fund.
Discovering Lesser-Known AI Stocks
Interestingly, the top holding of the Ark Autonomous Technology & Robotics ETF is Tesla (TSLA -0.05%), a company you’re likely familiar with. However, the rest of the top five holdings might surprise you:
- Teradyne (TER -2.17%) is a robotics company with a market cap of $23 billion.
- Kratos Defense & Security (KTOS 1.49%) develops products and software primarily for the defense industry, with a market cap just over $4 billion.
- Rocket Lab USA (RKLB -1.65%) has a market cap of $14 billion and focuses on developing spacecraft and related components.
- Archer Aviation (ACHR -14.41%) is valued at about $4.8 billion and specializes in electric vertical takeoff and landing aircraft.
For context, the combined market cap of these four stocks is just over 1% of Nvidia’s market cap. Yet, this Ark ETF has invested more than 31% of its assets in them.
Unique Approach with Reasonable Fees
The Ark Autonomous Technology & Robotics ETF offers a unique way to gain AI exposure without solely relying on the usual suspects. It includes significant positions in small and mid-cap stocks that have the potential for substantial growth.
It’s worth noting that while the fund’s 0.75% expense ratio is higher compared to an S&P 500 index fund, it isn’t much higher than what you’d pay for a passive AI ETF. In a recent analysis of popular AI index funds, expense ratios ranged from 0.47% to 0.68%. For a slightly higher fee, you get one of the most respected tech investors hand-picking the best AI opportunities.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Arista Networks, Meta Platforms, Nvidia, and Tesla. The Motley Fool recommends Broadcom, Rocket Lab USA, and Teradyne. The Motley Fool has a disclosure policy.
Originally Written by: Matt Frankel, The Motley Fool
