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3 ETFs to Invest in Robotics Stocks
The robotics market is booming, with projections calling for a 15.1% CAGR to $169.8 billion by 2032. As a major player, in the global market, the U.S. is expected to rake in $784.6 billion from robotics in 2024 alone, largely due to advancements in artificial intelligence (AI) and automation - and especially generative AI, which has been making headlines.
Money is pouring into robotics companies, too. In July, investments totaled $1.3 billion across 47 deals. One standout example is Serve Robotics (SERV), whose stock jumped over 300% in a month after NVIDIA (NVDA) invested $3.7 million.
But if you're thinking about making a robotics investment of your own, it's not necessary to speculate on individual stocks. There are ETFs (exchange-traded funds) that offer broader exposure to the robotics and AI theme, allowing investors to benefit from this megatrend over time. Let's look at three top funds that each take a slightly different approach to investing in robotics.
ROBO Global Robotics & Automation Index ETF (ROBO)
The ROBO Global Robotics & Automation Index ETF (ROBO) is a solid choice for investors seeking exposure to the robotics and automation sectors. Launched in 2013, ROBO is one of the largest and most established robotics ETFs, with $1.07 billion in assets under management.
ROBO tracks the ROBO Global Robotics and Automation Index, which measures the performance of companies in the global robotics and automation industry. The fund holds a diverse portfolio of 79 stocks, with no single holding accounting for more than 2.2% of the ETF's value.
The fund's top holdings include well-known names in the robotics and automation field. Intuitive Surgical (ISRG), the maker of the da Vinci surgical robot, is among the top five holdings at 2.20%. Other notable companies in the top 5 include wireless sensor specialist Samsara (IOT) (2.20%), ServiceNow Inc.(NOW) (2.13%), motion control tech company Novanta Inc. (NOVT) (1.99%), and automation firm Zebra Technologies Corp. (ZBRA) (1.99%).
ROBO's performance has been mixed in recent years. While it has shown promise in capturing the growth potential of the robotics and automation sector, it has underperformed the broader S&P 500 Index ($SPX) since its inception. ROBO is down 8.1% on a year to date basis, though the stock's roughly 12% pullback from its annual high may provide an appealing entry point.
ROBO's expense ratio is 0.95%, which is relatively high, but understandable given the fund's specialized focus. Investors also get a small dividend yield of 0.05%.
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT)
The First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT) is an attractive option for investors looking to gain exposure to the growing AI and robotics sectors. Launched on Feb. 21, 2018, ROBT tracks the Nasdaq CTA Artificial Intelligence and Robotics Index, focusing on companies involved in AI, robotics, and automation across various industries.
With around $463.7 million in AUM, ROBT is a smaller fund compared to some of its peers, but it's been steadily growing, with a net inflow of $30.56 million over the past year. This growth shows increasing investor interest in the potential of AI and robotics technologies.
The ETF holds a diverse portfolio of 114 stocks, which provides broad exposure to the sector while mitigating single-stock risk. Top holdings feature big names like new S&P 500 member Palantir Technologies(PLTR) (2.96%), AI fintech platform Upstart Holdings(UPST) (2.51%), cloud software company ServiceNow (2.41%), cybersecurity stock SentinelOne(S) (2.37%), and genetic testing specialist Illumina Inc. (ILMN) (2.25%). The ETF's passive management style aims to replicate the performance of its underlying index, giving investors a comprehensive view of the sector's potential.
ROBT is down 10% in 2024, providing an opportunity to buy the dip in this growth-focused ETF.
One of ROBT's strengths is its relatively low expense ratio of 0.65%, which is competitive for a specialized thematic ETF. This lower cost structure can help preserve returns for investors over the long term.
ROBT also offers a modest dividend yield of 0.28%, paid quarterly. While not substantial, this provides a small income stream for investors, which is uncommon among many growth-oriented tech ETFs.
For investors seeking targeted exposure to AI and robotics while tempering the risks associated with picking individual stocks, ROBT offers a balanced approach with its mix of established and emerging companies in the field.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
The Global X Robotics & Artificial Intelligence ETF (BOTZ) is a popular choice for investors seeking to capitalize on the growth potential of robotics and AI. Launched in 2016, BOTZ tracks the Indxx Global Robotics & Artificial Intelligence Thematic v2 Index, which focuses on companies that could benefit from increased adoption and utilization of robotics and artificial intelligence.
BOTZ has a significant asset base of $2.55 billion, making it one of the largest robotics ETFs. The fund holds a concentrated portfolio of 44 stocks, with a strong emphasis on large-cap companies, which account for 51.5% of its holdings.
The top five holdings include global tech industry leaders NVIDIA (11.04%), Intuitive Surgical (10.64%), Swiss automation giant ABB Ltd (ABBNY) (9.96%), Japanese sensor specialist Keyence Corp (KYCCF) (8.05%), and Tokyo-based automation company SMC Corp (SMCAY) (5.79%). This diverse mix across various industries and regions helps reduce risk, while providing exposure to the key players driving innovation in robotics, AI, and automation.
Performance-wise, BOTZ has been on a slow but steady upward trend over the past year, with a 52-week gain of 15.1%. Its 2024 performance has been more modest, with a 4.8% gain, but the ETF has outperformed its rival robotics ETFs - likely due to its heavy NVDA exposure. That said, with BOTZ down 11% from its March highs, investors can still buy the dip on this ETF.
BOTZ also has a relatively low expense ratio of 0.68%, which is competitive for a thematic ETF. The fund offers a modest dividend yield of 0.16%, making it more suitable for growth-oriented investors rather than those seeking income.
Conclusion
In conclusion, with the robotics, automation, and AI industries poised for significant long-term growth, investing in ETFs like ROBO, ROBT, and BOTZ offers a smart way to tap into this exciting trend. Each fund has its own twist, from ROBO's broad market approach to BOTZ's concentrated bet on industry leaders. While the returns have been muted so far, the explosive growth potential in robotics and AI makes them worth a look for patient investors with a longer-term time frame.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
