AI ETFs: should you buy one?

Buying an AI exchange-traded fund (ETF) is a simple way to give yourself exposure to one of the biggest investment trends. But, with 2025 bringing fresh challenges to the US big tech firms at the forefront, is now the right time to buy an AI ETF?

Artificial intelligence (AI) has taken the world by storm since the launch of ChatGPT in November 2022. Since then, the top funds and stocks across the world have been dominated by big tech stocks like the ‘Magnificent Seven’.

With its cutting-edge AI chips underscoring this revolution, Nvidia recently became the world’s first $4 trillion company thanks to the surging importance of AI.

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But the AI boom has its detractors. US dominance of the global industry came under threat earlier this year when Chinese upstart DeepSeek rocked stock markets.

US-focused ETFs have also seen outflows this year as president Donald Trump’s tariff policy has prompted global investors to consider selling US stocks.

“US equity ETFs dropped to their lowest level in 14 months in June,” commented Alastair Baillie Strong, global head of ETFs at Fidelity International. Geopolitical events such as the US’s intervention in the Middle East was one of the main contributors towards a $1.47 billion outflow from North America-focused UCITS ETFs during the month.

But some experts believe there is plenty more to come.

“AI capabilities are advancing exponentially, yet most businesses have barely begun to exploit them,” says Rahul Bhushan, Managing Director at ARK Invest Europe. “This gap between what’s possible and what’s been implemented is creating a massive opportunity.”

Bhushan adds that AI is also getting cheaper to deploy. “History shows that once transformative tech gets cheap and ubiquitous, adoption eventually inflects upward,” he says. “We expect a wave of enterprise AI adoption in the next few years (think 2025–2027), as the current hesitancy gives way to competitive pressure.”

The challenge in tapping into this opportunity comes in picking the eventual winners. “Companies at the forefront today might not be the leaders tomorrow,” says Bhushan.

Picking an ETF that invests in AI companies spreads your bets, giving you a greater chance of holding the eventual winners in your portfolio.

What kinds of AI ETF are available?

The first decision that applies to any ETF selection process is the active versus passive debate. Actively-managed ETFs tend to charge higher fees than passive equivalents, but they offer the potential to beat the market through the judicious trades of their portfolio manager. This isn’t guaranteed to happen (and in fact, some studies show that active management tends to underperform rather than outperform), but it can potentially lead to outsize returns.

“Active managers aren't bound by an index's rules,” says Bhushan. “This allows them to focus on a high-conviction ‘best ideas’ portfolio, selecting companies they believe have the strongest potential for growth within the AI ecosystem.”

It isn’t necessarily the case that all passive ETFs are the same. The selection and rebalancing strategy of their benchmark index can make a big difference to their returns.

Index construction also impacts the extent to which an ETF can be considered a true reflection of its stated objective (in this instance, AI exposure).

“If it is too broad, you can just end up with a lot of generalist stocks and an index that is more driven by general global trends rather than AI specifically,” says Ben Seager-Scott, chief investment officer at Forvis Mazars. “Whereas, if the index rules are too narrow, you can end up with a small number of obscure names that carry a lot of concentration risk and may not ultimately be the beneficiaries of the technology.”

As a demonstration of how it can differ even between four ETFs investing in the same theme, consider these four AI ETFs:

(*Price changes over the 12 months to 14 July 2025, except AIQU which shows returns since listing on 12 September 2024.)

Let’s have a look at the pros and cons of each ETF and explore what they potentially offer an investor’s portfolio.

1. INTL: targeted AI exposure

The WisdomTree Artificial Intelligence UCITS ETF (LON:INTL) tracks the NASDAQ CTA Artificial Intelligence Index.

This index assesses a broad universe of stocks' relevance to three categories (AI enablers, engagers and enhancers), and selects 15 companies (reviewed twice annually) from each based on the degree of their relevance. This gives its holdings a high level of relevance to the AI theme.

As of 14 July, INTL’s top three holdings are SK Hynix, Nvidia and Advanced Micro Devices – all of which are semiconductor companies key to designing and building the hardware that powers AI companies.

2. AIAI: quarterly rebalancing

The L&G Artificial Intelligence UCITS ETF (LON:AIAI) tracks the ROBO Global Artificial Intelligence Index. Like its Nasdaq counterpart, this index weights constituents based on their relevance to the AI theme.

However, it rebalances quarterly, meaning that there is twice as much buying and selling of the constituent stocks going on. Lots of investors like frequent rebalancing because it effectively automatically sells high, and buys low: assuming no change in relative AI relevance, stocks whose share prices have outperformed over the quarter will be sold, and those that have underperformed will be bought.

Though not for everyone (many investors prefer strategies that let outperformers run their course longer before taking profits), this makes AIAI an interesting option for investors that see the value in a quarterly rebalancing strategy.

3. AIQU: broad diversification

The newest of these four funds, the Global X Artificial Intelligence UCITS ETF (LON:AIQU) has outpaced INTL’s 19.4% price gains since its inception on 12 September, though it trails AIAI and ARKI’s during that time.

Its benchmark index, the Indxx Artificial Intelligence Index, uses a modified market cap-weighted approach that caps individual holdings at 3% and rebalances twice annually.

While this low cap could weigh on performance (by limiting the gains from individual outperformers), it does potentially make it appealing for investors worried about megacap concentration.

It has a very low concentration of Magnificent Seven stocks in its top holdings. At the time of writing, only Meta, Microsoft and Nvidia make its top ten, and none make its top five. Those spaces go to smaller companies like Palantir , the top holding at time of writing, and Chinese tech giant Tencent.

It therefore makes a solid choice for AI investors who want to diversify away from the main US megacaps.

4. ARKI: actively-managed AI

The ARK Artificial Intelligence & Robotics UCITS ETF (LON:ARKI) exemplifies the (often unfulfilled) promise of active management.

While the ETF only listed in April, it has already raced ahead of its three passive competitors, gaining over 60% over the last year. Investors holding the fund won’t mind an extra 35 basis points in fees when its returns are more than double that of the competition – though there is of course no guarantee that this will be the case over the long run.

With stock selection driven by ARK’s CIO and founder, Cathie Wood, investors can expect early-stage and little-known companies in this ETF, such as warehouse robotics company Symbotic, which has a market cap of just $28 billion.