New Robotaxi ETF Filing Adds Fuel to Thematic Autonomous Vehicle Funds

Waymo, and other self-driving car companies, are getting way mo’ attention from ETF issuers these days. 

Tidal Investments is the latest firm looking to take advantage of the growing robotaxi market. Tidal plans to launch an active exchange-traded fund that invests in 20 to 50 companies with exposure to the “development, operation and enablement” of autonomous ride services, per an SEC filing. The firm is expecting the largest allocation to be to US companies, but will also offer significant exposure to those in other countries, particularly China. The fee will be 0.75%, per the filing, and there’s no ticker available yet. Tidal declined to comment on the fund. 

Companies like Alphabet-owned Waymo, Amazon-owned Zoox and Tesla are racing to bring more robotaxis to the road. The global robotaxi market is expected to hit $147.25 billion by 2033, according to Grand View Research. “Robotaxi is a hot topic right now, and certainly something that is top of mind for a lot of investors,” said Zachary Evens, an analyst at Morningstar. “That said, how much demand there is for an ETF like this is to be determined, since it is quite niche.” 

Joining the Fleet  

In January, Roundhill Investments launched the first ETF specifically focused on robotaxis and autonomous vehicles: Robotaxi, Autonomous Vehicles & Technology ETF (CABZ). The fund comes with a 0.59% expense ratio and has garnered $1.28 million in assets.

Tidal’s filing suggests the firm is focused more specifically on robotaxis. That could be a differentiator for “some high conviction investors that want this specific exposure,” Evens said. But the legislative outlook raises questions: 

• Across the country, state lawmakers are wrestling with how to best regulate the technology. 
• Strict regulation could limit robotaxi companies from operating at the scale required to achieve the profitability expected of them, and weigh on related ETFs, Evens said. Though this isn’t specific to robotaxis. Cannabis and crypto ETF issuers, for instance,  are also grappling with a regulatory market that’s in flux. 

Interest in active, thematic ETFs is booming, but investors should understand just how niche and specific these investments are, Evens said. With the new robotaxi-related funds, investors are exposed to the risk of a very specific corner of the market and stocks that are highly correlated.

Long Road Ahead. The robotaxi and AV theme needs time to breathe, said Thomas DiFazio, ETF strategist at Roundhill Investments. “When you dig down to the company level and you see the rate of adoption and how the fleets are growing and the miles are driven, we think there’s a lot of positives to take away,” he added.