Investing in AI used to be simple: Just buy shares of S&P 500 champ Nvidia, sit back and count your money. But it's getting more complicated — and ETFs can help.
AI is going global. And broader AI-focused ETFs like ROBO Global Artificial Intelligence and Global X Artificial Intelligence & Technology expose investors to a bigger, global basket of AI stocks — not just the U.S. ones investors have piled into so far. And that's suddenly important.
News that China's DeepSeek is rivaling the power of U.S.-based models stunned investors. DeepSeek was allegedly built at a fraction of the cost of OpenAI. Think of it as America's Sputnik moment, but with AI and China rather than a space race with Russia.
"Investors may take a moment and revisit their approach," said Cinthia Murphy of ETF tracking firm TMX Vetta Fi. "Just buying single-stock Nvidia ETFs may no longer capture the opportunity set, which is evolving to include more than chips and hardware."
Time To Reconsider
China's DeepSeek success is a bombshell because it's supposedly being done with less power than U.S. AI models and without powerful U.S. semiconductors.
And that presented a reminder of the risk of investors piling into just a handful of S&P 500 stocks based in the U.S. That's paid off so far, Murphy says. But DeepSeek shows that the future may be different and less concentrated.
The value of the U.S. S&P 500 tech sector plunged nearly $1 trillion on the success of DeepSeek in U.S. phone app stores.
Going Broad With AI
Murphy says AI investors should pay closer attention to plays like ROBO Global Artificial Intelligence and Global X Artificial Intelligence & Technology.
Going beyond just U.S. AI chip stocks is already working. These ETFs "have diverse sector exposure, and access developers, adopters and service providers," Murphy said.
On Jan. 27's DeepSeek bombshell, 43 out of 55 holdings in ROBO Global Artificial Intelligence rose as Nvidia shares tanked. "Some of the holdings in that fund are up almost 30% year to date," she said.
The fund's top three holdings are Raspberry Pi, Cloudflare and Alibaba Group. All told, non-U.S. AI plays make up 24% of the portfolio.
But that means, too, that the ETF isn't entirely shutting the door to the U.S. AI kings. Nvidia is in the portfolio too, but it's just a 1.98% position. In contrast, Nvidia represents 6% of the S&P 500.
"Nvidia is a much smaller part of that portfolio," Murphy said. "It's that kind of strategy that we expect to see find more traction as we move forward."
Playing China
Cashing in on China's AI boom is a little tougher. But there are "broader China tech ETFs that could be interesting if an investor is looking to capture that segment," Murphy said.
The KraneShares CSI China Internet ETF owns companies like Alibaba — which is involved in AI development — but it's not an AI fund per se. And among the 148 positions in the Invesco China Technology ETF are many companies that are involved at least tangentially in AI. Tencent is a top holding at 10% of the portfolio. The company provides online mobile technology.
"The DeepSeek scare shouldn't derail investor appetite for U.S. large-cap and growth ETFs because conditions remain positive, but it will probably encourage a broadening of exposure, especially within tech and AI themes," Murphy said.
Largest AI ETFs
| ETF | Ticker | Assets (in billions) | YTD stock change |
|---|---|---|---|
| iShares U.S. Technology | IYW | $19.8 | 0.6% |
| Fidelity MSCI Information Technology Index | FTEC | $13.1 | -0.2% |
| First Trust Dow Jones Internet Index Fund | FDN | $7.1 | 7.1% |
| iShares Expanded Tech Sector | IGM | $5.8 | 2.2% |
| iShares Global Tech | IXN | $5.2 | -1.0% |
| iShares Exponential Technologies | XT | $3.2 | 3.6% |
| Global X Artificial Intelligence & Technology | AIQ | $2.9 | 3.9% |
| Global X Robotics & Artificial Intelligence | BOTZ | $2.8 | 4.3% |
| SPDR S&P Kensho New Economies Composite | KOMP | $2.2 | 4.1% |
| ROBO Global Robotics and Automation Index | ROBO | $1.1 | 4.8% |
