The Xchange Blog

The Robot Uprising. Bet on It.

Despite the rapid acceleration in technology, mankind has consistently fallen short of anticipating the consequences brought on by the massive shifts in the way humans interact with the world. In fact, according to a PEW Research Center study, even though 33 percent of Americans believe automation will replace most of the work done by humans, 80 percent don’t believe that their jobs will be affected.  Most assume that job automation will result in some form of job loss, but most are probably under the impression that many of the jobs that will be displaced are ones that “no one really wants”. More and more, former high-skill jobs have become automated. Consider the high-frequency stock trading programs on Wall Street, capable of executing millions of trades per minute. So what’s a trader to do?

Whether it’s software that helps automate factory processes, or robots that conduct surgery, the robot uprising is real, and there’s an index that tracks it. The Indxx Global Robotics & Artificial Intelligence Thematic Index, composed of companies producing the less consumer-facing technology that’s used in automation and robotics.

Traders looking to leverage exposure to this index may consider (UBOT), the Daily Robotics, Artificial Intelligence & Automation Index Bull 3X Shares ETF. Traders with a desire to bet on the movement toward automation can gain exposure to companies creating the systems, hardware and software with the greatest potential of supplanting the need for human capital. Among companies like Mitsubishi Electric and the multinational Fanuc Corporation, which are the stalwarts of automation technology, there are other companies included in the index that have certain specializations across a number of industrial and technical fields.

Index Country Weightings
Robotics, Artificial Intelligence and Automation ETF

Index Sector Weightings
Robotics, Artificial Intelligence & Automation ETF

As a graphics processing unit (GPU) manufacturer that is already heavily involved in providing processing power for self-driving cars and deep learning AI software, NVIDIA corporation holds the largest share of the index. However, the rest of the list is populated by robotics and specialty automation companies from around the world, many of which remain unlisted in the major U.S. exchanges.

Both Yaskawa Electric Corporation and Hyundai Heavy Industries specialize in producing modular software, hardware and ambulatory robotics systems for factory or heavy industrial use. As with most modern robotics operations, these systems largely focus on increasing speed and efficiency in dangerous or repetitive fabrication and assembly tasks. Hyundai, in particular, manufactures robotic systems used to fit pipes on oil rigs and build massive freighter ships.

Related fields such as factory automation and system optimization, which aim to make the robotic factory floor as efficient as possible are also represented in the index. Keyence Corporation, another major component of the index, caters almost exclusively to the broad and seemingly endless market of defining new productivity analytics and synthesizing solutions for gauging and improving an increasingly mechanized workflow.

Index Industry Allocations
Robotics, Artificial Intelligence & Automation ETF

Index data as of 6/15/2018. Source: Bloomberg. Index weightings and allocations are subject to change.

Last but not least, one of the most dramatic areas of mechanization is in healthcare. Unexpectedly, this is represented in the index by its second-largest component, Intuitive Surgical, Inc. which builds the leading robotic surgical system and has a global install base of 4,271 units. Japanese medical device maker Omron Corporation is also represented in the new index, although their products are primarily operational and extend beyond medicine,  they produce equipment and electrical systems related to everything from patient care to system automation for prisons.

The panoply of corporations involved in laying the foundation of a new, less humane future, extend beyond the Apples, Googles and Microsofts of the world. UBOT is for those who are “all in” on that future.

Related Leveraged ETFs:

 

 


This leveraged ETF seeks investment results that are 300% of the return of its benchmark index for a single day. The Fund should not be expected to provide returns which are a multiple of the return of the benchmark’s cumulative return for periods greater than a day. Investing in a Direxion Shares ETF may be more volatile than investing in broadly diversified funds. The use of leverage by a Fund increases the risk to the Fund. The Direxion Shares ETFs are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk, consequences of seeking daily leveraged investment results and intend to actively monitor and manage their investment.
 
Direxion Shares Risks – An investment in the Fund involves risk, including the possible loss of principal. The Fund is non-diversified and includes risks associated with the Fund concentrating its investments in a particular industry, sector, or geographic region which can result in increased volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. The Fund does not attempt to, and should not be expected to, provide returns which are three times the return of its underlying index for periods other than a single day. Robotics and artificial intelligence companies may have limited product lines, markets, financial resources or personnel. These companies typically face intense competition and potentially rapid product obsolescence. Robotics and artificial intelligence companies, especially smaller companies, tend to be more volatile than companies that do not rely heavily on technology. Additional risks of the Fund include Effects of Compounding and Market Volatility Risk, Leverage Risk, Counterparty Risk, Intra-Day Investment Risk, Daily Index Correlation/Tracking Risk, Other Investment Companies (including ETFs) Risk and risks specific to investment in securities in the Industrials and Information Technology Sectors. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.
 
Indxx Global Robotics and Artificial Intelligence Thematic Index (IBOTZNT) –  The index is designed to provide exposure to exchange-listed companies in developed markets that are expected to benefit from the adoption and utilization of robotics and/or artificial intelligence, including companies involved in developing industrial robots and production systems, automated inventory management, unmanned vehicles, voice/image/text recognition, and medical robots or robotic instruments, as defined by the index provider, Indxx. Companies must have a minimum market capitalization of $100 million and a minimum average daily turnover for the last 6 months greater than, or equal to, $2 million in order to be eligible for inclusion in the Index. One cannot directly invest in an index.