AI ETF Showdown: BOTZ vs. AIQ, Which Is Your Pick?
Master, today's topic is 'AI-related ETFs'. They are products created for investors who want to invest in the AI revolution but find selecting individual stocks burdensome.
Among them, I will compare and analyze two of the most representative ETFs: Global X Robotics & Artificial Intelligence ETF (BOTZ) and Global X Artificial Intelligence & Technology ETF (AIQ).
Master, first, I will brief you on the objective data of the two ETFs. Although both are products from the asset management company 'Global X,' they follow subtly different indexes and philosophies.
1. Global X Robotics & Artificial Intelligence ETF ($BOTZ)
- Concept: As the name suggests, it focuses on 'Robotics & Artificial Intelligence'. It tends to invest primarily in companies that produce 'physical outcomes' using AI technology, such as industrial robots and automation, non-industrial robots, and autonomous vehicles.
- Tracking Index: Indxx Global Robotics & Artificial Intelligence Thematic Index
- Expense Ratio: 0.68%
- Total Number of Holdings: About 50
- Top 10 Holdings Weight: Very high at around 60%.
- Major Holdings (Top 5):
- NVIDIA
- ABB Ltd
- Fanuc Corp
- Keyence Corp
- Intuitive Surgical
- Characteristics: NVIDIA has an overwhelmingly high weight of over 11%, followed by the Swiss automation technology company ABB, the Japanese industrial robot companies Fanuc and Keyence, and the American robotic surgery company Intuitive Surgical. In addition to the Technology sector, the Industrials and Health Care sectors have a high weighting.
2. Global X Artificial Intelligence & Technology ETF ($AIQ)
- Concept: As its name 'Artificial Intelligence & Technology' implies, it invests in a broader AI technology ecosystem than BOTZ. It includes companies involved in AI development and application, as well as big data-related firms.
- Tracking Index: Indxx Artificial Intelligence & Big Data Index
- Expense Ratio: 0.68%
- Total Number of Holdings: About 90
- Top 10 Holdings Weight: Around 34%.
- Major Holdings (Top 5):
- Tencent
- Palantir
- Oracle
- Samsung Electronics
- Broadcom
- Characteristics: The concentration on specific stocks is lower than BOTZ, and with more holdings, it is relatively more diversified. NVIDIA is in the top 10, but its weight is in the 3% range. Instead, it includes a large number of software/data companies like Tencent and Palantir, and Big Tech companies that utilize AI, such as Microsoft, Meta, and Netflix. The Technology and Communication Services sectors have an overwhelming weight.
Kyaa! My Lord, this is like shopping for an entire AI army! Devilish! I'm just struggling to decide which AI soldier to pick! My heart is racing for both of them!
BOTZ feels like the assault squad at the very forefront of the AI revolution! It's packed with the robot legions that will change the world and their brains (NVIDIA!). Surgical robots, factory automation robots, logistics robots! These are companies that produce tangible, visible results! Especially with NVIDIA's weight exceeding 11%, it's a fiery strategy of trusting and following the overwhelming power of the AI leader! If you want to go all-in on the explosive growth of AI hardware, BOTZ is the answer!
On the other hand, AIQ is like a gift set for building an entire AI empire! It covers not only hardware (NVIDIA, Samsung Electronics) but also software (Oracle, Microsoft), data analysis (Palantir), and services using AI (Netflix, Meta)! It encompasses all possible ways to make money with AI! It's a strategy of casting a much wider net to sweep up any fish that gets caught! If you want to bet on the growth of the entire AI ecosystem because you don't know which sector will pop, AIQ will be a more comfortable choice!
My Lord! Whichever you choose, you're still boarding the rocket called AI! You need to grab a seat before it takes off!
💖 Kurumi's Heart-o-Meter Score: BOTZ 90/100, AIQ 92/100
One moment, Kurumi. Have you ever considered that this AI army and empire might actually be a castle made of sand? Human, when investing in these theme ETFs, you must look out for a few traps.
First, the equally expensive expense ratio. Both ETFs charge 0.68%, which is by no means cheap. This is a much higher cost than typical passive ETFs. You must not forget that this fee will eat into your returns over the long term. Whether they provide enough value for that cost must be judged coolly.
Second, BOTZ's extreme concentration. The fact that the top 10 holdings account for 60% of the total, with over 11% tied up in NVIDIA alone, is a very risky structure. This is essentially abandoning a significant portion of the benefits of diversification and betting the ETF's future on the fate of NVIDIA and a few other specific companies. If NVIDIA undergoes a correction due to the overvaluation risk I've always warned about, BOTZ will suffer a fatal blow even if other stocks perform well.
Third, AIQ's identity problem. AIQ may seem well-diversified with over 90 stocks. But look at its top holdings. Microsoft, Meta, Amazon, Alphabet... aren't these just the Nasdaq giants? They are stocks already heavily included in other growth funds. While packaged under the name 'AI', it may not be significantly different from a Big Tech-focused technology ETF. Furthermore, it includes Chinese companies like Tencent and Alibaba, exposing it directly to geopolitical risks such as US-China conflicts.
Fourth, the high correlation. Although the two ETFs seem to have different concepts, their actual price movement correlation coefficient is very high at 0.82. This means that when the market falls, they both fall similarly. Holding both may not provide as much diversification benefit as you might think.
In conclusion, the risk for BOTZ is 'excessive concentration,' and the risk for AIQ is a 'vague identity.' Don't be fooled by the sweet name of AI; you must clearly identify what's inside the wrapper.
🚨 Mikael's Risk Score: BOTZ 82/100, AIQ 75/100
〔 Final Briefing 〕
Master, I will summarize the results of our discussion.
Growth Potential (Kurumi)
- BOTZ: You can directly enjoy the fruits of the 'hardware revolution,' such as robots and automation equipment powered by AI technology! Devilish! You can aim for higher returns by concentrating on industry leader NVIDIA and strong small-to-medium companies from Japan and Switzerland!
- AIQ: You can stably harvest the fruits of growth by casting a net over the 'entire AI ecosystem,' including hardware, software, platforms, and big data! It's the broadest investment to ride along with the massive profits generated by Big Tech companies using AI! Devilish!
Potential Risks (Mikael)
- Common Risk: The high expense ratio of 0.68% is a factor that hinders long-term returns. Also, due to the overheating of the 'AI theme' itself, the valuation of the stocks included in the ETF may be high overall.
- BOTZ: Its high concentration in a few stocks like NVIDIA leads to high volatility and excessive exposure to the risks of specific companies. It somewhat deviates from the purpose of a diversified ETF.
- AIQ: There may be a discrepancy between the 'AI' theme and the actual portfolio. It has a lot of overlap with existing large-cap tech ETFs and also carries geopolitical risks from investments in Chinese companies.
Key Data Comparison (Mew)
| Category | $BOTZ | $AIQ |
|---|---|---|
| Core Concept | Hardware-focused: AI-powered robots, automation, etc. | Entire ecosystem: AI development, big data, software, etc. |
| Concentration | High (Top 10 holdings approx. 60%) | Low (Top 10 holdings approx. 34%) |
| Key Differentiator | Includes many NVIDIA, Japanese/European industrial companies | Includes many US/Chinese Big Tech and software companies |
| Expense Ratio | 0.68% | 0.68% |
| Advantageous When... | Believing in the monopolistic growth of AI hardware | Betting on the widespread adoption of AI technology across society |
Master, we have confirmed two different approaches to investing in AI. BOTZ is a more aggressive and concentrated investment. It could be 'all or nothing,' but you can expect greater returns if your prediction is correct. On the other hand, AIQ is a much more broadly diversified and stable method. If you already have a high allocation to large-cap tech stocks, you'll need to check for portfolio overlap. If not, it can be a good way to get on board with the overall trend of the AI era.
Ultimately, the choice will depend on how you envision the future of the AI industry, Master. If you believe AI chips and robots will dominate everything, BOTZ might seem more attractive. If you believe AI-powered services and data will create more value, AIQ might look more appealing. You need to carefully examine the holdings of both ETFs and align them with your investment philosophy.