We sit less than two months away from the new year. This will also usher in a new decade. Investors should have already started to think about what sectors are positioned for big growth in the 2020s. Back in August, I’d discussed some of the sectors I’m excited for, including biopharmaceuticals and sports and nutrition supplements.
Today, we are going to focus on the artificial intelligence (AI) market. The application of AI has drawn interest across a broad variety of sectors. In fact, investors would be hard pressed to find an emerging industry that is not dipping its toe into some of the exciting technologies that encompass AI. Last week, I’d focused on one super stock that had shown a commitment to investing in AI technology. In this article, I’m going to switch gears and zero in on an ETF.
Growth of AI in the future
It is worth reflecting on why investment in AI is a smart move today. A November report from Kenneth Research, a New York-based market research and consulting firm, had some promising projections for AI in the manufacturing sector. The report forecasts that the global AI in the manufacturing market would reach $14.77 billion by 2024 compared to a value of $1.59 billion in 2018. This represents a CAGR of 47% over this time span.
Allied Market Research recently projected that the global AI market is expected to reach $169 billion in 2025. It estimated that it sat at roughly $4 billion in 2016. This would represent a CAGR of 55% from 2018 to 2025.
Look to this ETF for broad exposure to AI
Horizons Robotics and Automation ETF (TSX:RBOT) launched on November 28, 2017, so it is just approaching its two-year anniversary since its inception. It seeks to replicate the performance of the Global Robotics and Artificial Intelligence Thematic Index. That index aims for exposure to companies that are involved in the development of robotics and/or AI.
Investors in this ETF will be getting heavy exposure to the industrial and information technology sectors. Together they make up over 80% weighting in the fund. The top two countries by exposure in the fund are Japan and the United States, which sit at 49% and 30%, respectively.
Some of the top holdings in the ETF include Nvidia, a Santa Clara-based company that designs graphics processing units for the gaming and professional markets. It also designs system on a chip units for the mobile computing and automotive market. Keyence is the second-largest holding. This company is based in Osaka, Japan, and develops and manufactures automation sensors, vision systems, barcode readers, and other tech.
Shares of Horizons Robotics and Automation ETF have climbed 25.4% in 2019 as of close on November 13. This comes after a 26% drop in 2018. Investors will be paying a premium right now, as the ETF last had an RSI of 66, putting it just outside technically overbought territory. However, I love this ETF as a long-term hold. TFSA investors with a distant time horizon should look to make this a target right now.
