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AI and Robotics ETFs Are Hotter for Traders Than Crypto in 2023

(Bloomberg) -- The popularity of artificial intelligence-powered chatbots like ChatGPT is catching the eye of exchange-traded fund investors looking for exposure to the space.

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A majority of professional investors, 56%, are planning to add AI- and robotics-focused ETF strategies to their portfolios this year, according to a survey by Brown Brothers Harriman released on Monday. That figure is up from 46% in 2022. The category beat all other thematic strategies except internet and technology. That’s a stark contrast from 2022, when AI and Robotics trailed ESG and digital asset-themed ETFs.

A recent rally in AI stocks has super-charged investor interest in the industry. ETFs tracking robotics and AI have pulled in roughly $105 million in March, while other thematic strategies like clean energy, electric cars and cloud computing all saw outflows, according to data compiled by Bloomberg Intelligence.

The $1.7 billion Global X Robotics & Artificial Intelligence ETF (ticker: BOTZ) led the inflows with about $121 million so far this year. The fund is up 24% year to date.

“There’s always a crowd who wants exposure to the ‘next thing’ — whether it’s AI, SPACs, or EVs,” said Todd Sohn, ETF strategist at Strategas. “They don’t want to miss the FOMO run, especially given recency bias.”

Despite uncertainty over the Federal Reserve’s next monetary policy move and its impact on risk assets, the survey reveals investors are still keen to load up on certain kinds of speculative assets.

Even the crypto winter did not scare investors from cryptocurrency and digital asset-themed ETFs, according to the survey of 325 ETF institutional investors, financial advisors and fund managers from around the globe. Forty-eight percent of investors say they still plan to add that strategy in 2023. That’s down just 6 percentage points from last year.

Bitcoin, the world’s largest crypto based on market value, has rallied 70% as investors brush off a regulatory crackdown and bet the digital asset’s independence from the traditional financial system could make it immune to the turmoil in the banking industry.

In the case of AI, some investors like Ankur Crawford, a portfolio manager at Fred Alger Management, are betting that AI can be a deflationary force in the long-term because it will drive down costs and improve efficiencies.

“Initially it might actually be inflationary,” said Crawford. “There’s a cost associated with it to get it up and running. But later, I do think that’s a deflationary force.”

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