Xtrackers Artificial Intelligence and Big Data ETF: Is This ETF Late to the Party?

Investment banks, brokers, mutual fund companies, and exchange-traded fund (ETF) sponsors aren't working with you out of the kindness of their hearts. They are trying to make a profit from the relationship. You can benefit, too, of course, but you should never forget that Wall Street is in the business of making money.

Which is why a somewhat cynical look at Xtrackers Artificial Intelligence and Big Data ETF (NASDAQ: XAIX) is probably in order. Here are some problems to consider before you buy this relatively new artificial intelligence-focused ETF.

AI isn't new, but this ETF is

The first negative to consider with Xtrackers Artificial Intelligence and Big Data ETF is that it was launched in Oct. 2024. It is just a little over a year old, even though the AI investment opportunity has existed for much longer. For example, Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ) launched in May 2018.

Image source: Getty Images.

AI wasn't really a hot investment theme until the last couple of years, so Global X Artificial Intelligence & Technology ETF was early. But Xtrackers Artificial Intelligence and Big Data ETF was launched at a time when investors were starting to worry about an AI bubble. It seems very much 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 still fairly small

On that front, Xtrackers Artificial Intelligence and Big Data ETF's expense ratio is 0.35%. That's a bit high for an ETF, with some ETFs offering expense ratios below 0.10%. Of course, the ability to attach 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 around $112 million in assets, which is fairly small. For reference, Global X Artificial Intelligence & Technology ETF has $7.7 billion in assets. It isn't unusual for ETFs that don't gather enough assets to eventually get shut down.

XAIX data by YCharts

The premise behind Xtrackers Artificial Intelligence and Big Data ETF isn't bad. It invests in exactly what you would expect and owns over 90 securities. So it is a quick and easy way to get diversified exposure to the AI sector. But its performance is roughly similar to that of the older, larger Global X Artificial Intelligence & Technology ETF, so it isn't a particularly differentiated product.

While there's no huge reason to avoid Xtrackers Artificial Intelligence and Big Data ETF, there's isn't a particularly strong reason to recommend it, either. However, given the ETF's small size, if the AI bubble bursts, it's more likely to be closed down than its larger peers. Most will probably want to let Xtrackers Artificial Intelligence and Big Data ETF mature a little bit more before jumping in.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.