Artificial intelligence (AI) and robotics are growing parts of the investment lexicon, providing support to the thesis for the Global X Robotics & Artificial Intelligence Thematic ETF (NasdaqGM: BOTZ).
BOTZ, which is one of the dominant funds in this category, seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Robotics & Artificial Intelligence Thematic Index. The index itself captures large and mid-cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries.
BOTZ addresses a primary concern often associated with thematic ETFs: Viability of the underlying theme. Fortunately, AI and robotics are durable trends that are in their early innings.
“The business case for automation is strong,” says Morningstar analyst Alex Bryan. “Labor costs in emerging markets, where many firms have located much of their labor-intensive operations, have risen considerably over the past two decades. The rise of protectionism has made offshore production less appealing.”
BOTZ Has the Goods
BOTZ seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
Robotics and artificial intelligence are making machines smarter and more capable than ever before, allowing robots to take on increasingly sophisticated tasks for faster and more accurate production. Declining computer chip costs and improving connectivity allows for virtually any object to connect to internet-enabled networks, effectively turning anything into a connected device.
“It’s clear that robotics and AI will become a bigger part of how business is done and more integral to many consumer products in the future. That’s not sufficient to make a robotics and AI ETF like BOTZ a good investment,” writes Bryan. “The market is well aware of this growth opportunity. It’s the reason many companies positioned to directly benefit from these trends are trading at rich valuations. Yet there may be more room for these firms to surprise on the upside, as the opportunity is big and will probably become larger over time, as advancements in technology expand what is possible.”
Disruptive forces are among us irrespective of which sector one chooses to focus on, and the impact of technology, such as robotics, is just barely scratching the surface. This gives ETF investors the opportunity to jump in on disruptive-focused funds that delve into technology that is transformative.
“BOTZ is one of the better options for exposure to robotics and AI because it has stricter requirements for inclusion than its closest peers. As such, it offers a narrower portfolio of companies that are poised to benefit directly from the growing adoption of this technology,” according to Bryan.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.