Investment banks, brokerages, mutual funds, and exchange-traded fund (ETF) sponsors are not working with you out of the goodness of their hearts. They try to make a profit from the relationship. Of course, you can benefit from it too, but you should never forget that Wall Street wants to make money.
Therefore a somewhat cynical view Xtrackers Artificial Intelligence and Big Data ETF (XAIX +2.28%) is probably okay. Here are some issues to consider before buying this relatively new AI-focused ETF.
AI is not new, but this ETF is
The first negative point about Xtrackers Artificial Intelligence and Big Data ETF is that it was launched in October 2024. It’s just over a year old, even though the AI investment opportunity has been around for much longer. For example, Global X Artificial Intelligence & Technology ETF (AIQ +2.47%) launched in May 2018.
Image source: Getty Images.
AI wasn’t really a hot investment theme until the last few years, so the Global X Artificial Intelligence & Technology ETF was an early adopter. But Xtrackers Artificial Intelligence and Big Data ETF was launched at a time when investors were starting to worry about an AI bubble. It very much seems like it could be late to the party and little more than a me-too product. The clear hope is to increase the ETF sponsor’s assets under management.
Not a cheap product and yet quite small
On that front, the expense ratio of Xtrackers Artificial Intelligence and Big Data ETF is 0.35%. That’s a bit high for an ETF, with some ETFs offering expense ratios of less than 0.10%. Of course, the ability to establish a material expense ratio was likely one of the reasons the sponsor wanted to create the ETF in the first place. Meanwhile, the ETF only has about $112 million in assets, which is quite small. For reference, the Global X Artificial Intelligence & Technology ETF has $7.7 billion in assets. It is not uncommon for ETFs to fail to accumulate enough assets to ultimately be closed.
XAIX data by YCharts
The premise behind Xtrackers Artificial Intelligence and Big Data ETF is not bad. It invests in exactly what you would expect and owns over 90 securities. So it’s a quick and easy way to get diversified exposure to the AI sector. But its performance is about on par with the older, larger Global X Artificial Intelligence & Technology ETF, so it’s not a particularly differentiated product.
While there isn’t a huge reason to avoid Xtrackers Artificial Intelligence and Big Data ETF, there isn’t a particularly strong reason to recommend it either. However, given the ETF’s small size, if the AI bubble bursts, it is more likely to close than its larger peers. Most will probably want to let the Xtrackers Artificial Intelligence and Big Data ETF mature a bit more before jumping in.
