Prediction: This Robotics ETF Will Outperform Over the Next 5 Years

Key Points

• A projected 1.9 million unfilled U.S. manufacturing jobs by 2033 make automation a necessity, not a luxury.

• This fund's concentrated structure allocates heavily to the sector's winners rather than diluting returns across dozens of also-rans.

• Heavy exposure to Japan and Switzerland positions the fund to benefit from supply chain "friend-shoring" away from China.

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The factory of the future won't have a labor shortage -- because it won't need much labor at all. That's not a dystopian prediction. It's an economic necessity already unfolding across the manufacturing world.

The U.S. alone is projected to face a shortfall of 1.9 million manufacturing workers by 2033. China's working-age population is shrinking. Germany and Japan are graying fast. For companies building the next generation of semiconductor fabs, electric vehicle (EV) battery plants, and re-shored supply chains, the math is brutally simple: Automate or don't operate.

The Global X Robotics & Artificial Intelligence ETF (NASDAQ: BOTZ) offers a direct way to invest in this transition -- and I think it will outperform its peers over the next five years. Here's why.

The automation imperative

The bull case for robotics stocks used to hinge on efficiency gains. Robots were nice to have if they saved money. That calculus has fundamentally changed.

Manufacturing wages now average over $100,000 annually, including benefits -- and companies still can't fill positions. The workers simply don't exist. For factory managers, the choice isn't "robot versus worker" anymore. It's "robot versus shutting down the line."

This dynamic creates inelastic demand. Even in a slowdown, manufacturers can't stop buying robots because they're solving for supply constraints, not just cost savings.

What's inside the fund

This exchange-traded fund (ETF) holds 53 securities, with its top 10 positions accounting for approximately 60% of the fund's assets. That concentration is intentional. Another notable feature is that the expense ratio of 0.68% is slightly higher than the average of 0.61% for thematic ETFs.

So, what's inside the fund? Nvidia leads with 11.8% of assets. The company's Isaac simulation platform and Project GR00t foundation model are compressing robot development timelines from years to months.

ABB follows at 8.9%, offering exposure to both industrial robotics and electrification. Fanuc, offering exposure to the world's largest installed base of industrial robots, comprises 7.6% of the fund.

Intuitive Surgical offers defensive healthcare exposure at 7.3% through its dominant da Vinci surgical systems. And Keyence, a supplier of machine vision sensors, is essential as robots move from caged factory floors to unstructured environments and accounts for 5.7% of the fund.

This isn't a diversified technology fund. It's a concentrated position in the specific companies building the physical infrastructure of the artificial intelligence (AI) era.

The geographic advantage

Perhaps the most underappreciated aspect of the Global X Robotics & Artificial Intelligence ETF is its geographic positioning. Approximately 49% of the fund is invested in the U.S., with 26% in Japan and 9% in Switzerland. South Korea accounts for another 4%.

As Western nations actively de-risk supply chains away from China, Japanese robotics exporters are the primary beneficiaries. Fanuc's new Michigan facility expansion signals where growth is heading. The fund has minimal direct exposure to Chinese equities, insulating it from the regulatory uncertainty plaguing that market.

The friend-shoring tailwind

The CHIPS Act and Inflation Reduction Act are driving a manufacturing construction boom. However, there's a lag effect that most investors overlook: The semiconductor fabs and battery plants breaking ground now will need to be equipped with robots as soon as 2026.

The Global X Robotics & Artificial Intelligence ETF owns the companies that will supply that equipment. That alone is a compelling reason to invest in this robotics ETF.

Built for the labor crunch

The Global X Robotics & Artificial Intelligence ETF is not suitable for investors seeking broad diversification. It's a concentrated, thematic investment in the convergence of artificial intelligence and physical automation.

The risks are real. Nvidia trades at a premium valuation. Fanuc still derives meaningful revenue from a slowing Chinese market. Semiconductor cycles can turn quickly.

But the structural tailwinds -- demographic decline, reshoring, and the maturation of AI from chatbots to robots -- create demand that's difficult to derail. For investors willing to ride the volatility, the Global X Robotics & Artificial Intelligence ETF offers the purest exposure to what could be the defining industrial trend of the next decade.

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George Budwell, PhD has positions in Nvidia. The Motley Fool has positions in and recommends Abb, Intuitive Surgical, and Nvidia. The Motley Fool recommends Fanuc. The Motley Fool has a disclosure policy.

Prediction: This Robotics ETF Will Outperform Over the Next 5 Years was originally published by The Motley Fool