First Trust Advisors has expanded its lineup of thematic equity ETFs with the launch of a new fund focusing on companies at the forefront of artificial intelligence (AI) innovation.

Artificial intelligence is rapidly transforming businesses across multiple industries.

The First Trust Bloomberg Artificial Intelligence ETF (FAI US) has been listed on NYSE Arca with an expense ratio of 0.65%.

Artificial intelligence continues to advance rapidly, transforming industries such as healthcare, finance, manufacturing, and entertainment. From personalized recommendations to autonomous vehicles, AI’s integration into daily life is reshaping the global landscape.

Ryan Issakainen, Senior Vice President and ETF Strategist at First Trust, commented: “While AI is still in its early innings, its potential to dramatically boost productivity and efficiency across numerous applications is undeniable. While it’s challenging to pinpoint the exact winners and losers at this early juncture, FAI aims to strike a balance between focused selectivity and diversification.”

Methodology

The ETF tracks the Bloomberg Artificial Intelligence Index which leverages insights from Bloomberg Intelligence to screen the parent Bloomberg World Aggregate Universe for companies with significant exposure to AI, including firms involved with deep learning, machine learning, natural language processing, and image and speech recognition.

Firms are assessed based on their near-term AI revenue potential and strategic positioning within the competitive AI landscape. Only the Gold Tier, comprising companies with the highest AI exposure, qualifies for index inclusion.

Eligible companies must fall into at least one of the following AI Exposure Categories:

• Application Software: AI application development firms.
• Infrastructure Software: Developers of AI infrastructure software.
• Hyperscalers: Companies driving AI adoption across business layers.
• Hardware: Providers of AI-related hardware and storage solutions.
• Semiconductors: Suppliers of semiconductor technology for AI.

The index selects and weights the top 50 securities based on a combination of their revenue assessment and market capitalization. The index is rebalanced and reconstituted quarterly.

Portfolio Composition

The ETF’s portfolio is heavily weighted toward US-based companies (87.1%), with additional exposure to Taiwan (4.8%). Industry allocation is dominated by Information Technology (76.3%), followed by Communication Services (14.7%) and Consumer Discretionary (8.2%).

The most notable constituents include Nvidia (8.2%), Amazon.com (8.2%), Microsoft (8.0%), Alphabet (7.6%), Meta Platforms (7.1%), ServiceNow (4.3%), Palantir Technologies (4.3%), and Oracle (4.2%).