Investigating IBOT, the New Robotics ETF

Surging enthusiasm for artificial intelligence (AI) investments and technologies this year is giving rise to related themes — namely automation and robotics.

Automation and robotics have long been tied to AI and some investment strategies are leveraging that concept, including the newly minted VanEck Robotics ETF (IBOT). IBOT, which debuted earlier this month, has the makings of a well-timed new ETF, for more reasons than just the current groundswell of AI enthusiasm.

Amid the new wave of AI technologies and forecasts for what the future holds for the industry, some investors are forgetting about the earlier iterations of automation and robotics, including industrial robots. However, that industry, which is addressed in IBOT, still offers compelling growth prospects. By some estimates, it’ll be a $90 billion group by 2026.

As VanEck noted, industries including healthcare, logistics, and manufacturing are supporting demand for industrial robots, and governments around the world are making big investments in this form of robotics, indicating there’s plenty of growth ahead.

Obviously, there’s much more to the robotics investment thesis than merely industrial robots, and the Bluestar Robotics Index — IBOT’s underlying benchmark — provides the breadth necessary to capitalize on this expansive theme.

The seven sub-themes represented in IBOT’s index “include robots and manufacturing/industrial automation systems, robotic surgical systems, 3D printing, robotics or manufacturing computer aided design or other software, semiconductor manufacturing systems, machine vision, and embedded machine learning chips. Coverage includes global companies in developed markets, providing exposure to the world’s largest markets including China, the world’s leader in industrial robotics demand,” according to VanEck.

On another note, experienced thematic investors know that IBOT isn’t the first robotics ETF on the market. As such, it needs to differentiate itself from established rivals in the robotics ETF space. The VanEck fund does just that.

IBOT “is constructed using diversified subthemes that encompass the contributing segments that go into building robots. IBOT focuses on industrial robotic companies and uses strategic weighting to replicate the industrial robotics market. This is done by splitting the portfolio into seven subthemes that are spread across three tiers,” added the issuer.

More than 92% of IBOT’s 64 holdings hail from the technology and industrial sectors — a breakdown that isn’t unusual among robotics ETFs. Top 10 holdings include familiar US-based firms such as Nvidia (NVDA), Emerson Electric (EMR) and Texas Instruments (TXN).

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.