The ongoing enthusiasm for artificial intelligence has led to a surge in ETFs focused on this theme, offering investors new avenues to capitalize on AI market trends. According to Morningstar, over one-third of more than twenty AI-themed ETFs were launched this year. Recently, three new ETFs have entered the market, including one that rebranded from a cloud computing ETF to focus on AI. Collectively, these AI ETFs manage $4.5 billion in assets, nearing the $5.5 billion managed by nuclear energy-themed ETFs and far surpassing the $1.37 billion in the cannabis industry.
Senior analyst at Morningstar, Daniel Sotiroff, highlighted the rapid growth and development in the AI industry. NVIDIA (NVDA, Financial), a leader in the AI sector and chip manufacturing, has seen its stock price surge over 200% in the past year, reflecting sustained confidence in AI’s potential.
Tony Kim, head of the fundamental equities technology division at BlackRock, noted that beyond NVIDIA, AI could yield broader beneficiaries in the future. Kim manages two new AI-focused ETFs, the iShares A.I. Innovation and Tech Active ETF (BAI) and iShares Technology Opportunities Active ETF (TEK), launched by BlackRock.
BlackRock's first AI offering, the iShares Future AI & Tech ETF (ARTY), launched in 2018, holds $630 million in assets, trading slightly below its 52-week high set in October. Jay Jacobs, head of active and thematic ETFs at BlackRock, indicated the company’s newer funds are actively managed to seize emerging AI opportunities, unlike their index-linked predecessor. He emphasized, "The AI market will undergo significant changes."
In a recent report, Bank of America Securities analysts Ohsung Kwon and Savita Subramanian described an "AI arms race" between major tech companies like Microsoft (MSFT) and Amazon (AMZN). They anticipate these tech giants will spend $206 billion on AI capital expenditures this year, a 40% increase from the previous year, while the remaining S&P 500 companies may see a slight decline.
Venture capital firm Accel projects venture capitalists will inject up to $79.2 billion into AI startups by year-end, a 27% increase from last year, indicating 40 cents of every invested dollar will flow to AI companies.
While investing in AI-themed ETFs doesn't guarantee outperforming the market, the largest AI fund, AI & Technology ETF-Global X (AIQ), has risen about 20% this year, compared to the S&P 500's 22% increase. Earlier this month, Amplify ETFs rebranded its cloud computing ETF to the Amplify Bloomberg AI Value Chain ETF (AIVC) to focus on emerging tech. Nathan Miller, VP of Product Development at Amplify, expressed their aim to position for profitability as AI capital expenditures translate into earnings.
