Artificial intelligence is revolutionising opportunities for investors as much as it’s revolutionising everything we know about how we live and work.
So how can investors bring the best AI and cutting edge tech companies into their portfolios?
Enter a number of innovation and tech ETFs now available that specifically invest in companies well positioned to benefit from the increased adoption and utilisation of key tech areas like robotics, AI, cybersecurity and semiconductors.
These ETFs include some of the largest and fastest-growing companies in the world. But many of these companies don’t have the name recognition of more established and traditional tech. Rather, they are often delivering enterprise-level tech and innovation behind the scenes to governments and corporates and supporting varying industry needs through areas like robotics, the rising needs for computing power through semiconductors, and solutions for defending against cyber attacks and data breaches.
As such, grouping these companies into their core competency areas according to leading research is hugely beneficial for investors seeking to ensure their portfolios reflect the revolutionary tech shifts of our time.
Below, Forbes takes a look at three such innovation and tech ETFs, provided by Global X, which respond to some of the top concerns of business leaders right now: evolving cyber security threats, leveraging robotics and accessing the computing power required for AI.
Global X develops its ETF products based on quality research out of its New York headquarters, alongside expert market knowledge.
BUGG: A cybersecurity ETF
There is huge potential in cybersecurity companies, given the need for individuals, businesses and governments to continuously address data threats, and especially in the wake of a number of high-profile cyber-attacks.
Cybersecurity is a US$2 trillion market opportunity, according to October 2022 research by McKinsey & Company. But current initiatives are only servicing around 10 percent of this market.
It’s an area that keeps business leaders up at night, with a PwC survey of Australian CEOs finding that cybersecurity ranked higher than market volatility and climate change as a key concern. The cyber threat is also one that is only going to evolve and expand from here.
Companies like Optus, Medibank and Latitude Financial present cautionary tales to leaders, given the massive breaches they faced in 2022 and 2023. Individuals are also at risk and must respond to the threat, with more than 76,000 cybercrimes reported in the 2021-22 financial year.
The Global X Cybersecurity ETF (ASX:BUGG) invests in companies expected to benefit from the growing cybersecurity market. Companies included are those whose principal business is in the development and management of security protocols that prevent intrusion attacks on systems, networks, applications, computers and mobile devices.
This ETF was launched in September 2023, making it Global X’s newest and most exciting fund right now.
Sample cybersecurity companies in BUGG
ZSCALER INC: Zscaler protects customers from cyberattacks and data loss by securely connecting users, devices and applications in any location via a distributed cloud platform, with distribution across more than 150 data centres globally.
CROWDSTRIKE HO-A: CloudStrike offers an advanced cloud-native platform for protecting endpoints, cloud workloads, identities and data, which has achieved impressive results over the 2023 fiscal year.
PALO ALTO NETWORK: Palo Alto Network is a long-standing and well-established player in the cybersecurity space with major corporate and government contracts. In September, it announced a partnership with Palo Alto to deliver cybersecurity products and services for Telstra’s business customers.
ROBO: A robotics-focused ETF
The global robotics market is transforming industries and the market for such solutions is set to get much bigger.
Predicted to triple by 2026 to a market value of USD$74 billion from its USD$23 billion mark in 2020 according to 2021 Mordor Intelligence, the economic rationale for backing companies that can break through in this space makes sense. Accelerating tech developments are seeing the average cost of industrial robots declining, opening the market to broader adoption across industries.
Robotics and automation also have wide-reaching applications and untapped potential, moving into an ever increasing range of new applications.
The Global X ROBO Global Robotics & Automation ETF (ASX:ROBO) invests in companies that stand to potentially benefit from the increased adoption and utilisation of robotics and artificial intelligence, including companies involved in industrial robotics and automation, non-industrial robots and autonomous vehicles.
This fund has seen impressive returns since its inception in 2017, especially over the 12 months to September 2023.
Sample robotics companies in ROBO
INTUITIVE SURGICAL: Intuitive Surgical focuses on robotic surgical systems, and develops, manufactures and markets robotic products designed to reduce invasive care and improve clinical outcomes. It boasts impressive global cut through in healthcare, with 70 countries now using their Da Vinci systems, and more than 12 million procedures performed worldwide in 2022 using their robots.
COGNEX CORP: With a 40-year track record, Cognex supports manufacturing automation through vision systems, software, sensors and industrial barcode readers. It continues to innovate, in September announcing an expansion into the vision sensing space through the launch of its new product, the In-Sight SnApp vision sensor.
KRONES AG. Krones’ laser focus on the beverage industry and food producers sees it owning a significant market share for suppliers requiring bottling and packaging machinery.
SEMI: A pure-play semiconductor ETF
With increasing demand for computing power, to support artificial intelligence and other technologies, comes a massive demand also for semiconductors.
The rapid expansion in artificial intelligence applications requires significant rewiring across existing computational infrastructure to support the fast-growing needs for more data intensive computing.
Semiconductors are critical to everything from gaming to the Internet of Things connections (expected to double to 26.4 billion by 2026, according to Ericsson), medical research and more.
On AI, large language models are contributing to the rapid market for intensive computing in this space, with annual spending on AI chips expected to grow at a compound annual growth rate of 30 per cent to nearly US$165 billion.
The Global X Semiconductor ETF (ASX:SEMI) invests in companies that can potentially benefit from the broader adoption of tech-enabled devices requiring semiconducting, with companies involved in the development and manufacturing of semiconductors.
Indeed, the fast-growing demand for chips is raising concerns about the sustained availability of AI hardware available for training, testing and deploying AI models. Companies that can innovate in this space, and quickly respond to hardware demands, are well placed to achieve great results for investors.
Sample semiconductor companies in SEMI
Nvidia: Nvidia was initially focused on providing graphics processing units (GPUs) for video games, but with the use of GPUs widening out to other industries significantly over the past decade, including to support AI, Nvidia is tapping into new markets. Its data centre segment business has grown to a massive US$15 billion in annualised revenue.
ASML: This Dutch company is a pivotal player in global computing, providing the machines (EUV lithography) that put transistors into microchips. One of the largest companies in the world, despite its lack of name recognition, it is years ahead of any other would-be competitors in creating similar machines. They also sell some of the most expensive machines in the world, with the lithography machines costing around US$130 million.
TSNC: Taiwan Semiconductor produces more than 50 per cent of the world’s supply of semiconductors, and also runs the world’s largest factory for semiconductors in Taiwan. With a client list that includes Apple and others seeking continued innovation in chip miniaturisation, this is a company at the cutting edge of the ever-constant push for more powerful computers and phones.
These three ETFs are just some of the range of ETFs investors are pursuing. You can explore the Global X ETF range here.