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Interested In Blockchain Or Artificial Intelligence? Put 2 ETFs On Your Radar

Published 2021-02-15, 04:03 a/m

The NASDAQ 100 is at a record high, up about 43.6% over the past 12 months. By comparison, the Dow Jones Industrial Average and the S&P 500 are up around 6.4% and 16.4%, respectively.

While the bulls think that technology stocks will extend the rally into 2021, many investors wonder if the tech sector can continue to trade at such hefty premiums. As digitalization trends in 2020 have shown, the sector has robust growth prospects. Thus, many analysts concur that high valuation levels could be warranted.

We cannot know how the rest of the month or the year will play out for the tech darlings of Wall Street. Occasional pullbacks or even a deeper correction might always be in the cards. However, we can expect the tech sector to grow significantly in this new decade.

With that information, here are two exchange-traded funds (ETFs) that might appeal to a range of readers.

1. Global X Robotics & Artificial Intelligence ETF

  • Current Price: $36.46
  • 52-Week Range: $14.77 - $36.46
  • Expense Ratio: 0.68% per year

The Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ)) provides access to businesses that benefit from the increased adoption of robotics and artificial intelligence (AI). These firms are typically involved in industrial robotics and automation, non-industrial robots and self-driving vehicles. BOTZ Weekly

Recent metrics suggest:

"the global artificial intelligence market size was valued at USD 39.9 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 42.2% from 2020 to 2027."

Electric vehicles (EVs) and growing digitalization in different sectors, such as manufacturing, retail, e-commerce, finance, and health care, have been catalysts for the sector in recent quarters. For instance, (partial) business shutdowns and social distancing measures have put the limelight on automated production lines or increased the use of robots in manufacturing.

BOTZ, which has 32 holdings, tracks the INDXX Global Robotics & Artificial Intelligence Thematic Index. The fund started trading in September 2016, and assets under management stand at $2.75 billion.

In terms of sectoral allocation, industrials lead the fund with 43.1%. Next in line are information technology (IT) with 41.2% and health care (12.2%). Japanese businesses make up 34.1% of the holdings, followed by firms based in the US (36.1%), Switzerland (11.9%) and the UK (5.3%). Thus, investors would get significant non-US exposure, too.

The top ten stocks make up approximately 60% of assets. BOTZ's top five companies are chip giant NVIDIA (NASDAQ:NVDA), Fanuc (OTC:FANUY), Japan-based global leader in automation, Intuitive Surgical (NASDAQ:ISRG), developer of robotic-assisted surgery systems, ABB (NYSE:ABB), which focuses on automation technologies, and Keyence (OTC:KYCCF), which develops factory automation equipment.

Over the past year, BOTZ is up close to 60% and hit an all-time high on Feb.12. In case of short-term profit-taking in businesses that make up the fund, buy-and-hold investors might consider starting a position, especially if the price goes below $35.

2. Amplify Transformational Data ETF

  • Current Price: $54.48
  • 52 Week Range: $13.04 - $54.75
  • Dividend Yield: 1.21%
  • Expense Ratio: 0.70% per year

The Amplify Transformational Data Sharing ETF (NYSE:BLOK) gives exposure to businesses that develop or utilize blockchain technologies. Since its inception in January 2018, net assets have grown close to $1 billion.
BLOK Weekly

When we mention blockchain, many readers are likely to think of cryptocurrencies, including Bitcoin, Dogecoin, Ethereum, or Ripple that are frequently in the headlines. These cryptocurrencies are based on blockchain technology, which has a wide range of applications beyond the digital currency asset class.

Blockchain is a digital record-keeping ledger that is immutable. Decentralization, transparency and anonymization are some of the characteristics of blockchain technology. As data gets stored on servers globally, others can see recent entries in near real-time.

Adoption of blockchain technologies across different sectors, including agriculture, banking, cloud computing, digital infrastructure, education, entertainment, insurance, health care, real estate and retail, is growing. Recent numbers highlight that escalation:

"Worldwide spending on blockchain solutions is expected to grow from 1.5 billion in 2018 to an estimated 15.9 billion by 2023."

BLOK, which has 54 holdings, is an actively-manged fund. The top five industries (by weighting) are Software & Services (41.3%), Diversified Financials (17.0%), Media & Entertainment (11.3%), Retailing (8.6%) and Banks (6.0%). The top ten holdings comprise over 40% of assets. The companies in the fund mainly come from North America (56.8%) and Asia-Pacific (36.8%).

Among the leading names are MicroStrategy (NASDAQ:MSTR), which provides enterprise software platforms, digital asset merchant bank: Galaxy Digital (TSX:GLXY), Riot Blockchain (NASDAQ:RIOT), which focuses on Bitcoin mining, Marathon Patent (NASDAQ:MARA), which acquires and monetizes patents and patent rights, and Canaan (NASDAQ:CAN), provider of supercomputing solutions.

In the past year, BLOK is up over 171%. Like BOTZ, BLOK also saw a record high on Feb. 12. Those readers who want to invest in businesses that utilize blockchain technology without the daily volatility seen in cryptocurrencies might consider putting the fund on their radar screen. A potential decline toward the $50-level could offer a better margin of safety to long-term investors.

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