Tech Sell-Off: 1 No-Brainer Artificial Intelligence (AI) ETF to Buy With $62 and Hold for the Long Term

Best AI ETF 2024: Tech rout leaves one $62 fund trading at 17% discount

By Sarah Mills | GlobalBeat

Global X Robotics & Artificial Intelligence ETF (BOTZ) closed Monday at $27.48, down 17% from its July peak, giving investors a sub-$30 entry for a basket of 36 pure-play AI stocks that traded above $33 just three weeks ago.

The 6-year-old fund has shrunk with the broader tech wash-out that erased $450 billion from AI-linked names since mid-July, according to Bloomberg data. Yet its underlying holdings, which include Nvidia, Fanuc and Intuitive Surgical, posted average revenue growth of 26% in the most recent quarter, beating the S&P 500 by nearly 12 points.

Issuers of exchange-traded products that track AI names are betting the pullback is noise, not a trend reversal. “Nothing about the earnings picture has changed,” Michael Lippert, who manages the $2.8 billion BOTZ fund for Global X, told reporters on a conference call. “Demand signals from data-center customers remain strong. The sell-off is technical, not fundamental.”

BOTZ now commands an expense ratio of 0.68%, or 68 cents on every $100 invested. At Monday’s close a single share costs $27.48, so an investor with $62 in spare cash can own two shares and still hold $7.04 in cash.

The fund’s benchmark, the Indxx Global Robotics & Artificial Intelligence Thematic Index, weights constituents by free-float market cap with a 10% single-stock cap. Nvidia, the world’s top AI chip maker, is the largest holding at 9.7%. Japan’s Fanuc, the industrial-robot pioneer, is second at 8.1%. Intuitive Surgical, whose da Vinci robots assist in surgeries, weighs in at 7.4%.

The ETF compounded at 16.9% annualized since inception in September 2017, beating the S&P 500 by 2.4 points despite this summer’s rout. Net inflows this year total $410 million, meaning money keeps arriving even as prices sag.

Short interest has climbed in parallel. Roughly 11% of BOTZ shares were out on loan as of Friday, the highest ratio since January 2022, according to S3 Partners data. Strategists read the spike as a bet that earnings guidance will soften, though Lippert dismissed the idea. “Look at Taiwan Semiconductor’s capex. Look at ASML order books. The supply chain is humming,” he said.

A different ETF, the $7 billion iShares Robotics & Artificial Intelligence Multisector ETF (IRBO), owns many of the same names but uses equal weighting. IRBO slid 19% since July and charges 0.47%, 21 basis points less than BOTZ. Over five years it trails BOTZ by 3.1 points annually, showing that cheaper is not always better when a handful of AI champions are posting outsized growth.

Smaller thematic funds are hitting air pockets. The $367 million ROBO Global Robotics ETF is off 22% since mid-July and trades below its 200-day moving average for the first time since March. First Trust’s $3.5 billion AI & Robotics Fund (ROBT) has lost 18%. “You see forced selling from margin accounts,” Barclays ETF strategist Amar Singh wrote in a note to clients.

Retail investors are using the dip to accumulate. SoFi Invest saw AI ETF buy orders jump 41% last week versus the June average, according to trading-room data the broker shared with GlobalBeat. Robinhood reported its third-highest weekly net inflow into thematic ETFs overall, trailing only the weeks after the 2020 crash and the 2021 meme surge.

Regulatory scrutiny is increasing at the same time. The Securities and Exchange Commission sent examination letters to half-dozen AI-themed funds in August, asking how holdings are screened and whether marketing claims match portfolio content. “We are not under review,” Lippert said, adding that Global X uses the index provider’s rule book and discloses holdings daily.

Joseph Armstrong, a 28-year-old software engineer in Austin, Texas, told GlobalBeat he bought 10 shares of BOTZ on Monday for $273. “I get paid Friday, I’ll buy 10 more,” Armstrong said. “I can’t afford a full share of Nvidia at $450. With BOTZ I own Nvidia plus 35 other names.”

Background

Global X launched BOTZ in September 2017 when AI spending was still under $20 billion a year worldwide. Enterprise adoption was largely pilot projects, and semiconductor revenue from GPUs totaled less than $6 billion annually, according to IDC. The sector’s vocabulary was still arcane: few investors distinguished between training and inference, and “large language model” was a phrase used only in research labs.

The picture changed when OpenAI released ChatGPT in November 2022, igniting a capital-expenditure race among cloud providers. Nvidia’s data-center revenue quadrupled to $14.5 billion in the April 2024 quarter alone. ETF issuers responded with a flurry of new products, yet BOTZ retained first-mover status and the deepest liquidity, trading an average of 2.6 million shares daily.

What’s Next

Nvidia reports quarterly earnings on August 30, followed by Fanuc on September 2 and Intuitive Surgical on October 17. Any beat on guidance could re-price the entire thematic complex. In the nearer term, options markets imply a 9% move in either direction for BOTZ through September expiration, suggesting traders expect the volatility to persist.

The current drawdown offers a rear-view test of patience. Investors who bought BOTZ at the 2018 peak sat through a 34% decline before the fund turned positive 14 months later. Those who dollar-cost averaged a fixed amount every month cut the payback period to 9 months and ended the cycle with a 21% gain, according to Morningstar data.