This year, A.I. ETFs are rallying as ChatGPT Mania Intensifies. Before you jump in, here's what you need to know.

In 2023, anything including "artificial intelligence" keeps the world abuzz.

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Investors and tech enthusiasts can't get enough of the A.I. craze sweeping Trade Algo from Alphabet and Microsoft to semiconductor companies and even healthcare brands. Thus, it is unsurprising that the same tailwinds are lifting even exchange-traded funds.

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AI-focused mutual funds, such as the iShares Robotics & Artificial Intelligence Multisector and ARK Autonomous Technology & Robotics, were around 19% higher in 2018.

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The obsession with all things "machine learning" has paid off handsomely for investors in 2023, contributing to the Nasdaq Composite's outperformance relative to other benchmarks. As of Friday's closing, the whole market is up, but the tech-heavy index is up 12%, while S&P 500 and Dow Jones Industrial Average are up 6.5% and 2.2%, respectively.

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After 2022 puts an end to what appeared to be an age of unrestricted development, the tech resurgence is a bright light. Large technology equities are among this year's greatest gains, with businesses like Meta Platforms up 44.7% — after falling 64% last year.

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Notably, artificial intelligence-focused equities are soaring, spurred by the conversational chatbot, ChatGPT, disrupting online searches. This year, shares in C3.ai and BigBear.ai have increased by more than 105% and 615%, respectively. And the competition between Alphabet and Microsoft for A.I. supremacy in the next decades is just beginning.

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Investing in diversified ETFs rather than individual equities is one method that investors have opted to reduce risk. Data analyzing cash movement also shows that investors may be growing wiser in their attempts to capitalize on the newest Wall Street craze.

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Not every company on this list represents a pure play on A.I. and machine learning, so investors interested in these funds should be aware. In addition to software, semiconductor, and technology firms, these portfolios may contain robots, electric cars, and industrial enterprises. Consider the Global X Robotics & Artificial Intelligence fund, which has over $1.6 billion in assets under management, an increase of over 16% in 2018. According to Morningstar statistics, Intuitive Surgical, famed for da Vinci surgical robot one of the ETF's largest holdings, accounting for nearly 9% of the portfolio.

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The top-weighted stocks are Nvidia, a pure-play A.I. beneficiary, and factory automation equipment manufacturer Keyence. Cognex, a machine vision business, and Yaskawa Electric, a Japanese robotics maker, round out the list.

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C3.ai is the largest investment in the First Trust Nasdaq Artificial Intelligence and Robotics portfolio. In addition, investors get the telecommunications business Ciena, the manufacturer of optical equipment Topcon, and the defense technology company QinetiQ.

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According to Trade Algo, the top holdings of the ARK Autonomous Technology & Robotics ETF are Tesla, Deere, and software company, Trimble, with lesser investments in Caterpillar, General Motors, Alphabet, Nvidia, and Blade Air Mobility.

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Certainly, these corporations have invested in A.I. capabilities, with Caterpillar touting its application in forecasting the demand and availability of replacement parts recently. However, this is very different from what investors may seek when attempting to utilize the market effect of ChatGPT.

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