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2 Artificial Intelligence (AI) ETFs to Buy Now and Hold for Decades

The hype around artificial intelligence (AI) has been at its peak for the past 18 months. Although artificial intelligence has been around for many years, recent advances in technology mean that in terms of investment potential, artificial intelligence is still in its infancy.

Investors should expect even more changes in the coming years, with some companies thrust into the spotlight while others falter, unable to keep up with the competition. This has many investors interested in the sector wondering how to identify winning AI stocks that will remain profitable over the long term.

1. ETF with a proven track record

QQQ 2024 06 10

Invesco QQQ Trust (NASDAQ: QQQ) doesn't market itself as an artificial intelligence fund, but its DNA could make it the most robust AI ETF money can buy. It tracks the Nasdaq-100 index . This index is very technologically advanced; about 60% of its shares are in the technology sector. The rest is mostly healthcare and consumer discretionary stocks.

More importantly, the top ETF holdings are already big players in the AI ​​space. Names such as Microsoft, Nvidia, Amazon and Meta Platforms make up the top five, accounting for 26% of its total value. These major tech companies are major players in AI-related fields such as semiconductor chips (Nvidia), cloud computing (Microsoft and Amazon), and the metaverse (Meta Platforms). This is a great showcase of AI from companies that are already fundamentally sound.

The fund has already shown strong results; Invesco QQQ has easily outperformed the S&P 500 and Nasdaq Composite over the past decade:

Invesco QQQ SP 500 Nasdaq Composite June 2024

There's no guarantee that its dominance will continue indefinitely, but betting on the world's biggest tech companies has paid off. Since these same companies are already at the forefront of the AI ​​industry, it seems like a good idea to continue riding these horses for long-term growth.

2. AI ETF with High Growth Potential

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Investors who are feeling a little more adventurous can find an ETF specifically dedicated to artificial intelligence. Launched in May 2023, Roundhill Generative AI & Technology ETF (NYSEMKT: CHAT) aims to deliver long-term performance with a focus on generative artificial intelligence and its growth potential . The big difference between this ETF and Invesco QQQ is that it does not track an index. Managers of the Roundhill Generative AI & Technology ETF regularly buy and sell positions.

The potential benefit of an actively managed fund is that smart investment decisions can pay off in huge returns. Fund managers are currently bullish on Nvidia (the ETF's largest position, over 14%) and Microsoft (the ETF's second-largest position, over 10%). The fund currently has 50 holdings. The risk is that poor decisions by these managers could undermine investors' returns.

The Roundhill Generative AI & Technology ETF has performed well so far, outperforming the S&P 500 and Nasdaq Composite since its inception:

Roundhill Generative AI Technology ETF SP 500 Nasdaq Composite

Actively managed ETFs often charge higher fees than passively managed funds. The expense ratio for this is 0.75%, which is significantly higher than Invesco QQQ's 0.2%. This fee effectively puts this ETF on par with the Nasdaq Composite in terms of performance (for now). However, high fees won't matter as much if the investment returns are high enough for a long enough time.

Ultimately, any of these funds can benefit long-term investors. PwC predicts that the global economic impact of AI could exceed $15 trillion per year by 2030. In this scenario, investors who put money into this trend are likely to make very good returns, regardless of which of these funds they own.

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