Interactive Investor

Don’t be shy, ask ii…how can I invest in artificial intelligence?

23rd December 2021 09:20

Lee Wild from interactive investor

No question is a stupid one, so whether you want to find out what you need to do to start investing or how the stock market works, don’t be shy, ask ii. Email yours to:

Anthony asks: how can I invest in Artificial Intelligence, presumably at the moment in research?

Lee Wild (pictured above), Head of Equity Strategy, interactive investor, says: there are several thematic exchange-traded funds (ETFs) that offer exposure to artificial intelligence (AI). Two of the more pure-play ones are:

These two ETFs track a different index and have different weighting methods. For example, the L&G ETF uses the ROBO Global® Artificial Intelligence Index TR, while the WisdomTree one uses the Nasdaq CTA Artificial Intelligence NTR Index.

The weighing of both companies is based on “scores” deemed to reflect how involved a company is with AI, with those deemed more “pure play” receiving a higher weighting.

I think WisdomTree’s approach is appealing. The index it uses divides companies into three groups based on each company’s position in the “AI Value Chain” and estimated revenue exposure.

The three groups are:

Enhancers – companies who are prominent force in AI, but AI is not yet a core part of their revenue

Enables – companies whose core products are enabling the further development of AI

Engagers – companies whose main purpose is to provide AI-powered products and services.

Companies in these groups are then assigned an AI intensity score based on estimated revenue coming from AI, how core AI is to company’s offering and their market prominence in AI.

Collectively, enhancers can only make up 10% of the portfolio, enablers 40% and engagers 50%.

This is all more complicated than the average market cap weighting or even equal weighting. However, the idea is that this allows the investor to gain as much of a pure-play exposure to AI as possible.

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