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AI explains a lot of the reason why Canadian stocks have been left in the dust by the U.S. market this year.

Artificial intelligence is an investing hot spot in 2023 and many U.S. stocks are benefiting. This, along with the popularity of other tech stocks, is a big reason why the Nasdaq 100 Index was up about 36 per cent for the year through late June, the S&P 500 was up 14 per cent and the S&P/TSX Composite Index gained just 3.8 per cent.

Holding an exchange-traded fund tracking the Nasdaq 100 or S&P 500 indexes is one way to get exposure to AI in a portfolio, and it’s probably the best way because you’re diversified. While AI has the potential to become a powerful force in the economy, we are in the early stages of seeing which companies can participate in the sector profitably. Expect to see some AI stocks rise and fall.

If you’re comfortable with the risk of a more direct approach to AI investing, consider an ETF offering exposure to the sector. There are several U.S.-listed ETFs focusing to varying degrees on AI – a few examples are the Global X Robotics & Artificial Intelligence ETF (BOTZ-Q), the iShares Robotics and Artificial Intelligence Multisector ETF (IRBO-A) and the First Trust Nasdaq Artificial Intelligence ETF (ROBT-Q). With a Canadian-listed ETF, you avoid having to convert Canadian dollars into U.S. currency at the typically high rate charged by your broker. Instead, the ETF company does currency conversion at lower wholesale rates.

TD Securities recently produced a list of Canadian-listed ETFs with the most exposure to AI. The funds were listed in various categories, including thematic ETFs and broad market ETFs. Among thematic ETFs, the funds mentioned by TD include:

  • Horizons Robotics and Automation Index ETF (RBOT-T)
  • Evolve FANGMA Index ETF (TECH-T)
  • Horizons Global Metaverse Index (MTAV-T)
  • Evolve Cloud Computing Index Fund (DATA-T)
  • BMO MSCI Next Gen Internet Innovation Index (ZINT-T)

Most of these funds are quite small, which means investors should keep an eye on trading volumes and bid-ask spreads. Wide spreads suggest you’ll pay a premium price to buy and you may have trouble selling at a competitive price if AI loses momentum as an investing theme. Broad-market ETFs mentioned by TD included the TD Global Technology Leaders Index ETF (TEC-T) and Nasdaq 100 ETFs from BMO, Horizons, iShares and Invesco.

Support for AI investing can be found in the recently issued midyear investing outlook from BlackRock, the global investing giant. BlackRock included AI among five “mega forces” offering investment opportunities today. “Artificial intelligence (AI) and the digital disruption of established sectors and economies is going mainstream,” the outlook says. “An explosion in computational power and data has sparked AI’s ascent.”

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 22/04/24 10:28am EDT.

SymbolName% changeLast
GX Robotics & Artificial Intelligence ETF
Ishares Robotics and Artificial Intelligence ETF
Artificial Intelligence and Robotics ETF FT
Horizons Robotics Automation Idx ETF
Evolve Fangma Index ETF [Cad Hedged Unit
Horizons Global Metaverse Index ETF
Evolve Cloud Computing Index Fund Hg ETF
TD Global Technology Leaders Index ETF

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