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How to Ride the AI Wave and Diversify Your Portfolio

Welcome back to The Alt Investor- where we are showing you how to diversify your portfolio and earn a return worthy of your intelligence. Speaking of which…

Artificial Intelligence is currently one of the most talked about topics in tech. You cannot scroll on LinkedIn, Twitter, or any other platform without someone mentioning AI.

In today’s newsletter, we are going to cover the best ways to invest AI technology- from ETFs to private company investing.

As always, remember to subscribe for weekly insights on the Alternative Investing market!


The most obvious way to invest in Artificial Intelligence is through ETF investing. Stock and ETF investing are some of the most popular ways to invest in technology, but ETF investing can prove to be a better fit for a portfolio rather than investing wholly in single companies.

The term “artificial intelligence” is extremely broad- there are many different AI ETFs that cover different verticals within the AI space.

Global X Robotics and Artificial Intelligence ETF ($BOTZ)

First up is an ETF from Global X that contains AI companies specializing in robotics. While there are over 44 companies in the ETF, the top holdings are as follows:

  • Keyence ($KYCCF): This Japanese company focuses on automation products for factories and manufacturing lines
  • Fanuc ($FANUY): Another Japanese manufacturer focusing on factory automation
  • Intuitive Surgical ($ISRG): As the name suggests, Intuitive Surgical manufactures robotic surgical equipment
  • ABB ($ABB): ABB is a Swiss industrial and robotics manufacturer
  • NVIDIA ($NVDA): The famous semiconductor company that makes chips used in everything from gaming, cryptocurrency mining, and even self-driving vehicles
Performance of $BOTZ ETF vs S&P 500

Over the past year, $BOTZ has underperformed the S&P 500, mainly due to the tech industry as a whole taking a beating.

First Trust NASDAQ AI and Robotics ETF ($ROBT)

Created in 2018, $ROBT is an ETF that tracks AI companies, but with more of a software focus as opposed to hardware and robotics. There are currently 108 stocks in the ETF, with the top holdings being:

  • ($AI): A cloud software provider of an artificial intelligence platform.
  • Atos ($AEXAF): Atos specializes in digital transformation, helping companies with analytics, AI, and automation.
  • Pegasystems ($PEGA): A provider of a low-code software platform and similar tools.
  • ANSYS ($ANSS): A maker of engineering simulation software.
  • Luminar Technologies ($LAZR): An automotive tech company that provides sensors for passenger cars.
    $ROBT Performance vs S&P 500
$ROBT Performance vs S&P 500

Similar to $BOTZ, $ROBT has underperformed the S&P 500 due to the large sell-off in tech stocks.

The Problem with ETFs and Stock Investing

When looking at the two above ETFs, both have underperformed the S&P due to conditions largely out of control of these specific AI companies. It brings to attention an important point: when diversifying your portfolio, there is only so much diversification that could be done with public companies.

Stocks naturally all have differing levels of correlation, with stocks in the same industry having the highest correlation. If you have a portfolio of stocks already, and want to invest in AI, investing in stocks or ETFs will likely not have much of a diversification effect as you may want. Many of these companies are still at the mercy of the big FAANG stocks (Facebook, Apple, Amazon, Netflix, Google)

How to Invest in The Private Markets

Due to recent regulation changes, it is now possible to invest in private companies, similarly how a Venture Capitalist might invest. There are different platforms offering different ways to invest in private, early stage companies, including AI startups.

StartEngine: Investing in StartUps

StartEngine is a platform in which startups can post offerings to raise money through Regulation A+ and Crowdfunding. The differences between these are minimal, mainly resulting in a difference in how much you can actually invest.

There are a wide variety of companies accepting investors- including AI. One example is Flash AI, a weather prediction artificial intelligence system. The company is valued at $90.67MM and currently raising additional money through crowdfunding. The minimum investment is also only $100- which is as accessible as buying a stock or an ETF!

While more risky than buying a stock of an established public company, or an ETF of a stock, buying shares in a private company is a unique opportunity to “get in early” with some of the most innovative companies around today.

Percent: Invest in Private Credit

All of the investments we have thus discussed have been different forms of equity investing, however it is important to add a credit portion to your porfolio.

Percent is similar to StartEngine, in that it is making an asset class that was previously unavailable to retail investors accessible. Percent describes Private Credit as:

Private credit is an asset class of privately negotiated loans and debt financing from non-bank lenders. This includes small business and consumer loans, venture debt, and other forms of private debt.

Small businesses, startups, and individuals seek private credit when they cannot access public credit markets.

In short, investing in Private Credit means investing in loans that are given to companies. With a platform like Percent, you can decide which types of loans you’d like to invest in.

One of the largest advantages to adding credit to your portfolio is that is uncorrelated from the stock market. Diversification is the key to consistent returns, and private loans is the key to greater levels of diversification.

While Percent does not let you get as granular as StartEngine or stock investing in choosing specific stocks to invest in, you can choose the type of loan you’d like to put your money behind. This includes Consumer Loans, SMB (small-to-mid sized business) Loans and Cash Advances, SMB Leases, and Corporate Loans. AI companies likely will live in each of these categories.

Looking Forward to the Future of AI

Some people are actively cheering for AI, while others are warning of its possible dangers to society. Either way, AI continues to be developed and change faster and faster. Every month seems to bring more innovation to the space, and we are left to wonder what even one year from now will look like.