Nvidia stock spike shines light on ETFs offering AI exposure

As interest in artificial intelligence grows, it's worth looking under the hood of sector ETFs.

If there was any doubt about the potential impact of artificial intelligence, the spike in the price of chip maker Nvidia (NVDA) serves as a reminder of how eager the markets are to embrace the AI space.

The stock price is up more than 160% since the start of the year, including a 26% one-day gain after the company’s earnings report this week highlighted its focus on artificial intelligence.

With a market cap hovering around $1 trillion, Nvidia is emerging as a poster child of where investing in AI can go. But for financial advisors who might be less keen on chasing stocks to the sky, the smarter way to jump on the bandwagon might be through certain diversified slices of the ETF space.

According to VettaFi, there are at least 10 ETFs where Nvidia has a weighting of between 10% and 15%, which could provide a lot of exposure to the hot stock.

Topping the list is VanEck Semiconduct or (SMH) at 15.2%, followed by AXS Esoterica NextG Economy (WUGI) at 14.2%.

In total, VettFi found 319 ETFs with some exposure to the stock.

Sumit Roy, senior ETF analyst at ETF.com, believes the surge in Nvidia’s stock price will be a boon for those ETFs with heavy weightings in the stock. And for market-cap weighted indexes, those weightings will only get bigger as the stock price continues to climb.

But because Nvidia is just one of several companies developing and advancing the various channels of AI, a cleaner type of exposure could be carved out through specific sector funds, said Todd Rosenbluth, director of research at VettaFi.

A few examples include Global X Robotics & Artificial Intelligence (BOTZ), which has a 9.6% NVDA weighting; Roundhill Generative AI Technology (CHAT), at 7.8%; and Robo Global Artificial Intelligence (THQ), at 2.2%.

“Since ChatGPT emerged, AI has become a buzz word within the investment industry, and companies exposed to it and ETFs that provide access are top of mind for many advisors,” Rosenbluth said. “But this is still a nascent technology, so there is reward potential but also high risk.”