💎The Smart Way to Invest in AI: Global X AIQ ETF Deep Dive

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Good Thursday, ETF UNO community! In the evolving ETF investment landscape of 2025, no theme is capturing investor interest as much as artificial intelligence. It is still ]the best theme after a wonderful 2024. Today, we’ll explore the Global X Artificial Intelligence & Technology ETF $AIQ ( ▼ 0.14% ) , a fund gaining significant attention in the AI investing space.

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What is AIQ?

AIQ focuses on investing in companies that leverage artificial intelligence (AI) technology in their products and services, as well as those providing hardware for big data analysis.

What sets AIQ apart is its broad approach to AI investing. Rather than limiting itself to well-known semiconductor firms, AIQ looks to capture the entire AI ecosystem, investing in both established names and emerging players, regardless of sector or geography.

Investor confidence in the AI sector is growing, as reflected by significant inflows. This trend suggests that AI is not just a buzzword; it's a transformative technology that generates real returns. The global AI market, driven by breakthroughs in generative AI, is expected to reach $184 billion in 2024 and grow to $826.7 billion by 2030, showcasing an impressive compound annual growth rate.

AIQ stands out from other tech ETFs due to its global approach, with 32% of its portfolio allocated to foreign assets and 68% to U.S. stocks. This diversification offers exposure to AI innovation across developed markets worldwide.

Investment Strategy📊

When considering how to incorporate AIQ into your ETF portfolio, several strategic approaches are worth considering.

• 🛰️The fund works exceptionally well as a satellite holding within a core-satellite framework, where it can represent your exposure to the AI megatrend while complementing broader market index funds.

• 🚀For growth-oriented portfolios, AIQ can serve as a thematic overlay, typically representing 5-15% of equity allocations, depending on your risk tolerance and conviction in the AI theme. Its relatively low correlation with traditional value factors makes it an effective diversifier within growth-heavy portfolios.

• 🗺️The fund offers global technology exposure without the complexity of multiple regional ETFs. AIQ's strategy limits individual holdings to a maximum of 4%, providing essential risk management often absent in concentrated tech investments.

Consider dollar-cost averaging into AIQ, given the theme's volatility. The AI sector experiences significant momentum swings, and systematic investing can help smooth out entry points while building exposure over time.

AIQ at a glance

ETF Issuer: Global X

Inception: 2018-05-11

Asset Class: Equity

Underlying Index: Indxx Artificial Intelligence & Big Data Index

Geographical Focus: Global

Expense Ratio: 0.68% (as of last data point)

Dividend Yield: 0.13% (as of last data point)

Distribution Frequency: Semi-Annually

Historical Performance

AIQ’s track record highlights the potential and volatility of thematic investing. The fund has returned 7.2% over the past year, 10.8% over three years, and an impressive 18.8% annually over five years, capitalising on the AI boom while staying competitive with broader technology benchmarks.

However, this strong long-term performance comes with significant short-term volatility. The fund’s results closely align with AI adoption cycles, regulatory changes, and the sentiment of the technology sector.

ETF Radar View

The radar chart below shows the general characteristics of the ETF:

Top 3 Reasons to Invest

1. Diversification Within the AI Theme: AIQ spreads risk across more than securities in its portfolio. This diversification protects against company-specific risks while maintaining meaningful exposure to AI leaders. No single holding dominates, reducing the concentration risk that plagues many tech-heavy portfolios.

2. Global Market Access: AI innovation isn't limited to Silicon Valley, and AIQ recognises this reality. The fund's international exposure captures opportunities in markets where AI development is accelerating, from autonomous vehicles in Germany to fintech in Asia. This global approach provides currency diversification and exposure to different regulatory environments and market dynamics.

3. Strong Liquidity and Institutional Support: AIQ boasts strong liquidity, characterised by substantial daily trading volume, making it an attractive option for both retail and institutional investors. The massive fund flows demonstrate institutional confidence, providing stability and reducing tracking error versus the underlying index. This liquidity ensures efficient execution and tight bid-ask spreads for investors.

Top 3 Reasons Not to Invest

1. High Expense Ratio Impact on Long-Term Returns: At 0.68%, AIQ's fees are significantly higher than those of broad-market ETFs, which could potentially detract from long-term performance. For buy-and-hold investors, these costs compound over time, making the fund less attractive compared to lower-cost alternatives for long-term wealth building.

2. Technology Sector Concentration Risk: While AIQ diversifies within the AI sector, it remains heavily concentrated in technology companies that are vulnerable to sector-wide downturns. The AIQ ETF, which focuses on AI technology, has not exhibited unique AI characteristics in its portfolio and suffers from high technology concentration. During technology bear markets, thematic funds like AIQ often experience amplified volatility compared to diversified portfolios.

3. Valuation Concerns and Bubble Risk: The AI theme has attracted enormous investor attention, potentially inflating valuations beyond fundamental justification. With massive capital flows chasing limited AI pure-plays, investors risk buying into a bubble similar to the dot-com era. The fund's success has paradoxically increased this risk by making AI exposure easier and more popular.

🌊Riding the AI Wave

The Global X Artificial Intelligence & Technology ETF provides an attractive investment opportunity for those seeking exposure to transformative technologies. With its global diversification and strong liquidity, AIQ is a suitable choice for portfolios seeking AI investment beyond individual stocks.

However, investors should be prepared for volatility and maintain a long-term outlook. The fund's performance will likely depend on technology cycles and AI adoption rates, making it less suitable for conservative investors or those wanting steady income.

AIQ offers a valuable opportunity for exposure to artificial intelligence in growth portfolios. However, it should be considered a satellite holding due to its higher expenses and technology focus. For investors optimistic about AI's long-term potential, AIQ is a solid option within this transformative theme.

Ready to explore ETF strategies and discover investment opportunities like AIQ? Our community offers insights on thematic investing, core portfolios, and emerging sectors. Subscribe today to stay ahead in the evolving world of ETF investing.

DISCLAIMER: This article is for informational purposes only and should not be considered as investment advice. Always conduct your own research and consult with a financial advisor before making investment decisions.