Comparing the Expense Ratios of ETFs Investing in AI: Which One Is Right for You?

by Nick Peck of VettaFi, 6/24/23

The artificial intelligence (AI) industry is growing rapidly, and investors are looking for ways to gain exposure to this market. One way to do this is through ETFs that invest in AI. This article will explore the expense ratios and YTD returns of four ETFs investing in AI with some of the lowest fees in the market. By comparing these key metrics, investors can evaluate which ETF may be the most cost-effective option for gaining exposure to the AI industry.

Expense ratios are an important consideration when investing in ETFs because they represent the annual cost of owning the fund. The YTD return is the total return generated by the ETF from the beginning of the year to the present day.

Broad-Based Tech ETFs

The Fidelity MSCI Information Technology Index ETF (FTEC) has an expense ratio of 0.08% and a YTD return of 37.69%. FTEC is one of the cheaper broad-based tech ETFs on the market but still invests in AI. This ETF strives to replicate the returns of the MSCI USA IMI Information Technology Index, which encompasses businesses that are actively involved in the creation, manufacturing, and dissemination of technology-related products and services. The fund is not exclusively focused on AI. However, it holds positions in industry leaders like NVIDIA Corporation and Broadcom Inc.

The iShares U.S. Tech Independence Focused ETF (IETC) has an expense ratio of 0.18% and a YTD return of 35.87%. IETC is another broad-based tech ETF on the market but still invests in AI. The fund seeks to track the performance of the S&P Technology 1500 Index, which includes companies involved in developing, producing, and distributing technology products and services. Like FTEC, IETC holds positions in AI-focused companies like NVIDIA Corporation, Broadcom Inc, and Alphabet Inc. Class A.

The iShares U.S. Technology ETF is another broad tech ETF (IYW) is a fund investing in AI. IYW is investing in AI through its top holdings, which include Microsoft Corporation, NVIDIA Corporation, Alphabet Inc. Class A, and Broadcom Inc. This broad-based tech ETF has an expense ratio of only 0.39%, making it an affordable option for investors seeking exposure to the AI industry. Additionally, IYW has had a strong YTD return of 45.89%, making it an attractive choice for investors looking for both affordability and strong performance in the AI space.