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Guide

Best Ways to Invest in AI Without Picking Individual Stocks

By TheFinanceBase Team 11 min read

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The most practical way to invest in artificial intelligence without choosing individual companies is to keep a diversified broad-market mutual fund or ETF as your core investment and, if you want more targeted exposure, add a relatively small AI-focused fund as a satellite. Broad funds reduce the damage from any one company or technology failing; AI-themed funds give you a more direct bet on the sector but usually bring greater concentration, valuation, volatility and fee risk. Before buying, compare the fund’s holdings, diversification status, strategy, costs, turnover, geography and liquidity in its current prospectus and shareholder report.

What “investing in AI” can mean

Artificial intelligence is not a single industry. A fund marketed around AI may own companies that develop machine-learning models, supply semiconductors and data-center equipment, sell cloud or software services, provide data infrastructure, or use AI inside an otherwise unrelated business. Two funds with “AI” in their names can therefore behave very differently.

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There are four common exposure types:

  • AI developers: companies building models, applications or specialized software.
  • AI enablers: semiconductor, networking, storage, cloud, data and other infrastructure providers.
  • AI adopters: businesses integrating AI into products or internal operations.
  • Broad technology baskets: diversified technology funds in which AI is an important theme but not the sole selection criterion.

Because the technology is spreading across industries, a fund that owns enablers and adopters may be less dependent on one model developer. It can also be less “pure” AI exposure. Read the index rules or active-manager process instead of inferring exposure from the name.

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The core-satellite approach

Use a diversified fund as the core

A broad-market mutual fund or ETF pools money from many investors and owns a wide range of companies. The Securities and Exchange Commission notes that pooled funds can spread investments across companies or sectors, although some funds are far less diversified than others. A broad-market core can give you exposure to profitable AI leaders and to companies that may benefit from adoption without requiring you to identify the eventual winners.

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Check how broad the fund really is. A fund can hold hundreds of securities yet still be dominated by a handful of mega-cap companies. Review its top-10 weight, sector allocation, single-company limits and whether it is legally diversified under its governing documents.

Add an AI fund only for targeted exposure

An AI-themed ETF can be a satellite position around the core. It may emphasize developers, infrastructure, software, robotics, big-data businesses or a combination. The satellite should match the amount of thematic risk you can tolerate: its value can fall sharply when enthusiasm, valuations or a particular technology cycle turns, even if the long-term AI story remains intact.

There is no universally correct satellite percentage. Decide the maximum loss and tracking error you could accept, then keep the position small enough that a disappointing theme does not derail your broader plan. Rebalance to that limit rather than adding automatically after a price surge.

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ETF versus mutual fund mechanics

Both structures can provide diversification, but the purchase process and trading price differ.

Feature ETF Mutual fund
How you trade Shares trade on an exchange during market hours. You submit an order and receive the next calculated net asset value (NAV).
Price Market price can be above or below NAV; bid-ask spreads matter. One NAV is calculated for the dealing point specified by the fund.
Order control Market, limit and other brokerage order types may be available. Orders generally execute at the next NAV; intraday limit orders are not available.
Account requirement A brokerage account is required for retail purchases. Usually purchased through a brokerage or directly from the fund, depending on the product.
Costs to compare Expense ratio, spread, any commission and trading-related tax effects. Expense ratio plus any purchase, redemption or account fees and tax effects.

An ETF’s quoted price is not guaranteed to equal the value of its underlying holdings. In a stressed market, spreads can widen and discounts or premiums can increase. A mutual fund avoids intraday spread decisions but also cannot be bought or sold at a price you choose during the day.

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Documented AI-focused ETF examples

The following products illustrate different approaches; they are examples for comparison, not a ranking or personal recommendation. Verify the latest filings because holdings, fees and policies can change.

Fund Method and scope Diversification and concentration Documented cost or activity
Global X Artificial Intelligence & Technology ETF (AIQ) Rules-based ETF seeking to track the Indxx Artificial Intelligence & Big Data Index. The index covers AI developers, AI-as-a-service providers and hardware such as semiconductors and storage. The April 1, 2024 summary prospectus says at least 80% of total assets are invested in index securities. Review the current holdings and weight limits to determine actual concentration. Total annual fund operating expenses were 0.68% in the Global X Funds 2024 prospectus. That figure is not a guarantee of the current expense ratio.
Alger AI Enablers & Adopters ETF (ALAI) Actively managed. The April 30, 2026 prospectus describes “AI Enablers” (infrastructure, hardware, software and services) and “AI Adopters” (companies integrating AI into products or operations). The fund normally invests at least 80% of assets in companies expected to benefit from AI and is identified as non-diversified. It may place a substantial portion of assets in fewer issuers, increasing position-specific risk. Portfolio turnover was 194.32% in the most recent fiscal year reported in that prospectus. High turnover can increase transaction costs and taxable distributions in a taxable account.

The 80% policies are not interchangeable. AIQ’s threshold relates to securities in its index; ALAI’s relates to companies the manager expects to benefit from AI. Neither threshold tells you how many holdings you will own, how large the top position can become or how much of the portfolio is outside the United States.

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How to compare any AI fund before buying

1. Map the holdings, not the label

Download the latest holdings file or shareholder report. Record the number of positions, the top 10 weights, the largest single position and exposure by industry. Look for overlap with your existing broad-market fund: buying an AI ETF may simply increase your weight in companies you already own.

2. Identify the selection method

An index fund follows published rules. Examine rebalancing dates, inclusion criteria, market-cap or liquidity screens and caps on individual holdings. An active fund gives a manager discretion; read how the manager defines an enabler or adopter, what research process is used and how quickly positions may change.

3. Check legal diversification status

Do not assume a fund is diversified because it owns multiple stocks. A prospectus may classify a product as diversified or non-diversified, and that status affects how much it can invest in a small number of issuers. ALAI’s prospectus explicitly identifies it as non-diversified.

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4. Calculate the complete cost

Start with the expense ratio, then add the costs that appear in your situation:

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  • ETF bid-ask spread and any brokerage commission.
  • Fund turnover and the trading costs it creates.
  • Account, purchase, redemption or short-term trading fees.
  • Taxes on dividends and realized capital gains in a taxable account.

A fee is deducted from fund assets, so it reduces the return you receive even when you never see a separate bill. Compare like with like: a low-cost broad fund and a higher-cost thematic fund serve different portfolio roles.

5. Review geography, currency and liquidity

Global holdings can broaden the opportunity set but add foreign-market, currency, political and regulatory risks. Check the percentage invested outside your home market and whether the fund uses ordinary shares, depositary receipts or other instruments. For an ETF, examine average trading volume and the typical spread; a thinly traded product can be expensive to enter or exit even with a modest expense ratio.

6. Read the risk and shareholder sections

Search the prospectus for concentration, technology, semiconductor, foreign-investment, small-company, active-trading and derivatives risks. The shareholder report shows what the fund actually owned and how it performed relative to its benchmark, but past performance does not establish future results.

Step-by-step: implementing an AI allocation

  1. Set the purpose. Decide whether you want general market growth, a deliberate AI tilt, or both. Write down the maximum portfolio loss you could accept from the thematic position.
  2. Choose the account. A taxable brokerage account offers flexibility but creates reporting and capital-gains considerations. A tax-advantaged account may change when taxes are due and what investments are available. Check the rules and contribution limits that apply to your jurisdiction.
  3. Open or use a regulated brokerage account. Complete identity verification, enable two-factor authentication and confirm that the account is covered by the protections described in its customer agreement. Retail ETF purchases require a brokerage account.
  4. Build the core first. Select a genuinely broad mutual fund or ETF after checking its holdings, fees and concentration. Automate contributions if that helps you maintain a consistent plan.
  5. Screen the satellite. Search the fund ticker, open the current prospectus and shareholder report, and verify the strategy, 80% policy (if any), diversification status, top holdings, expense ratio, turnover and trading liquidity.
  6. Place the order deliberately. For an ETF, decide whether a limit order is appropriate and check the live bid-ask spread before submitting. For a mutual fund, understand the cutoff time for receiving that day’s NAV.
  7. Document the decision. Save the prospectus date, intended allocation, purchase price and reason for buying. This makes later rebalancing less vulnerable to headlines and hype.
  8. Review on a schedule. Recheck the fund at least when a new prospectus or shareholder report arrives, and whenever the portfolio drifts beyond your chosen limit. Do not trade solely because AI news is trending.

Risks specific to AI-themed investing

Concentration and correlation

Many AI funds own the same semiconductor, cloud and software companies. Different tickers can therefore produce nearly identical results. A fund that is legally diversified can still be economically concentrated in one technology cycle.

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Valuation and expectation risk

Prices can reflect years of expected growth. If adoption takes longer, margins disappoint or interest rates rise, an AI fund can decline even while companies continue making technical progress.

Technology and business-model risk

Models can become obsolete, computing costs can change, regulation can restrict deployment, and customers may build competing tools internally. Enablers may suffer if a new architecture reduces demand for their products; adopters may spend heavily without earning a return.

Turnover and tax drag

Active selection and frequent index changes can create realized gains inside a taxable fund. ALAI’s reported 194.32% turnover in its latest fiscal-year disclosure is a reminder to examine this line rather than assuming a thematic fund is a buy-and-hold vehicle.

Liquidity and trading risk

Small or specialized holdings may be difficult for a fund to trade during market stress. ETF spreads can widen, and the market price can diverge from NAV. Use the prospectus and trading data to judge whether the product is suitable for the amount you plan to invest.

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Fraud and unreliable AI investing claims

AI enthusiasm attracts unregistered platforms, guaranteed-return promises and pump-and-dump promotions. The SEC, NASAA and FINRA warn investors not to treat a polished website, chatbot or AI-generated forecast as evidence of legitimacy or future performance.

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The regulators state: “Be cautious about using AI-generated information to make investment decisions or to attempt to predict changes in the stock market’s direction or in the price of a security.” Use AI tools, if at all, to organize questions and documents—not to override a prospectus, verified account statement or regulated advice.

  • Verify that an investment professional is registered and check disciplinary history through Investor.gov or the applicable regulator.
  • Be skeptical of guaranteed returns, pressure to act immediately, secret algorithms and requests to send money to a personal wallet.
  • Confirm the legal entity, custody arrangement, fees, redemption terms and audited documents before transferring funds.
  • Never provide brokerage credentials or one-time security codes to a promoter or automated “advisor.”

When a broad fund is the better answer

A broad-market fund is usually the more robust default when you are building your first portfolio, have a short time horizon, cannot tolerate large drawdowns or already own substantial technology exposure through retirement plans. It avoids the need to predict which AI segment wins and lets successful firms enter the portfolio through normal index rebalancing.

An AI satellite can make sense when you understand the concentration, can leave the money invested through severe volatility, and have a written rebalancing rule. It should complement—not replace—emergency savings, debt management, diversification across asset classes and a time horizon appropriate to your goals.

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A practical pre-purchase checklist

  • Is the fund’s current prospectus dated recently enough for your decision?
  • What are the top 10 holdings and their combined percentage?
  • How many securities are held, and what is the largest single position?
  • Is the fund legally diversified or non-diversified?
  • Does it track an index or rely on active management?
  • What exactly qualifies a company as an AI developer, enabler or adopter?
  • What is the expense ratio today, and are there other account or trading charges?
  • What was the latest portfolio turnover, and could it create taxable distributions?
  • How much is invested outside your home country, and what currency risks follow?
  • How liquid are the ETF shares and the underlying holdings?
  • How does the purchase fit with your existing funds and your maximum thematic allocation?
  • What event would make you reduce or sell the position?

Bottom line

For most investors, the strongest way to gain AI exposure without selecting individual stocks is a diversified broad-market fund as the foundation, with an AI-themed ETF used only as a measured satellite if its extra risks are acceptable. Compare the actual holdings, diversification rules, strategy, fees, turnover and liquidity in current filings. AIQ demonstrates a rules-based, index-oriented approach with 0.68% expenses reported for 2024; ALAI demonstrates active enabler-and-adopter selection, non-diversified status and 194.32% reported turnover for its latest fiscal year. Those figures describe specific prospectuses, not permanent product characteristics, so verify them before every purchase.

Frequently Asked Questions

Can I get AI exposure without owning an AI-labeled fund?

Yes. A broad-market fund already owns many companies developing infrastructure, software or services that use AI. This gives indirect exposure while reducing dependence on a single theme.

Why can two AI ETFs have very different returns?

Their definitions, holdings, geographic mix, concentration limits, fees, turnover and active-versus-index methods may differ substantially. Compare the current portfolio and prospectus rather than the ticker name.

Does an 80% AI-investment policy guarantee that a fund is diversified?

No. The policy describes where assets are invested, not how many issuers are held or how large the largest positions may be. A fund can meet an 80% test and remain highly concentrated.

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Should I use a market order for an ETF?

A market order executes at the best available price but does not guarantee the price you expect. Check the spread and consider a limit order when controlling the maximum purchase price matters.

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