Looking Beyond NVIDIA? These 3 AI ETFs Are Beating the Market

Made in America and built to power it (From Frontieras)

Before the OpenAI IPO materializes and while Anthropic has yet to go public, it may be tough for investors to cite a single company as the face of AI. Still, NVIDIA Corp. (NASDAQ: NVDA) is as good a candidate as any: as the largest publicly traded firm in the world and an undisputed leader in the semiconductor and chips space, this $5-trillion behemoth has held tremendous influence over the tech-heavy Nasdaq-100 as well as the broader market overall in recent years.

Still, while NVIDIA's dominance is unquestioned as a supplier of AI hardware, the industry—and its opportunities—extends beyond a single firm. Near-term beneficiaries of AI include data center makers, energy suppliers, hardware and software firms, industrial companies, and many others. Investors looking to diversify beyond the biggest names in the space while still staying tied to AI in some way can do so in a variety of ways; the three exchange-traded funds (ETFs) below not only provide three unique angles for approaching AI, but they also have returns that have beaten the market, sometimes by a wide margin.

A Combination of a Broad Focus and a Selective Portfolio

One of the broadest approaches can be found in the iShares Future AI & Tech ETF (NYSEARCA: ARTY), which looks across the entire AI ecosystem to include companies contributing software, infrastructure, and other services. Any firm that may help to encourage AI adoption is up for grabs, including cloud infrastructure providers, networking companies, automation businesses, and more.

Despite this wide mandate, ARTY's basket is focused: it holds 66 companies selected from a global screen. While the large majority are tech names, industrials, communication stocks, utilities, and even real estate firms all make up a portion of the portfolio. Domestic firms are only somewhat dominant, representing under two-thirds of invested assets, with companies based in Taiwan, South Korea, and a variety of other nations also represented. This diversification provides an essential bit of variation from a U.S.- and tech-heavy approach that would be all too easy to find in an AI fund. NVDA shares are prominent here but represent less than 5% of assets.

The variety does come at a moderate price, however, and ARTY has an annual fee of 0.47% despite being a passively managed fund. Still, the fund's year-to-date (YTD) return of roughly 55% lends credence to the ETF's underlying investment thesis—that no single company or industry is going to build the AI landscape by itself.

A Lower-Cost, Better-Diversified Semiconductor Fund

Outside of NVIDIA, many other companies in the semiconductor space are having a major impact on AI. The Xtrackers Semiconductor Select Equity ETF (NASDAQ: CHPS) provides worldwide chip exposure that includes NVDA, but again, at just about 5% of the total portfolio.

To be sure, investors have many options when it comes to semiconductor ETFs, so a fund must distinguish itself in order to be compelling with this theme. One way that CHPS is able to do so is with its cost—at an annual fee of 0.15%, this fund is significantly cheaper than some of its major rivals. It also has a broader basket of names than some large semiconductor funds, providing attractive diversification (although just within a single, fairly narrow theme). Finally, it utilizes an environmental, social, and governance (ESG) criteria screen, which may appeal to some investors.

Ultimately, what draws many investors may be CHPS' strong performance; however, the fund has returned a whopping 72% YTD.

Looking Outside of Chips With an Infrastructure Play

While much of the technological hype for AI has come from hardware development, the industry would not function without crucial infrastructure to support electricity, transmission, and more. The Global X U.S. Infrastructure Development ETF (BATS: PAVE) is not exclusively linked to AI projects, giving it a more expansive reach in some ways than the funds above. It may also see benefits from legislation designed to stimulate spending on infrastructure projects.

Many of the companies in PAVE's portfolio are also critical to AI, though as a result of their roles as construction firms, industrial manufacturers, electrical equipment suppliers, and so on. The fund does have a moderately high expense ratio of 0.47% and the lowest YTD return of the three ETFs on this list at about 17%, but it has still outperformed the S&P 500 this year. For those looking for an indirect approach to AI that is buffered with a solid non-tech focus, PAVE may be able to provide access to two different spaces at once.

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