Asset managers launch new ETFs to capitalize on AI excitement
Asset managers are launching new ETFs to capitalize on the growing excitement surrounding AI.
TroibNews 
Exchange-traded funds concentrating on artificial intelligence are rapidly increasing as asset managers provide investors with new avenues to engage in the market excitement surrounding AI, despite uncertainty regarding which companies will ultimately succeed in this technological revolution.
According to data from financial services firm Morningstar, over a third of the two dozen ETFs featuring artificial intelligence, or AI, in their titles have been introduced in 2024 alone.
In just the past week, three additional ETFs have entered the market, including a revamped cloud computing ETF specifically tailored to target AI. The AI ETF sector now boasts assets totaling $4.5 billion, nearing the $5.5 billion associated with nuclear power-themed ETFs and significantly exceeding the $1.37 billion found in the cannabis sector.
"I'm not surprised their ranks are multiplying," said Daniel Sotiroff, senior analyst at Morningstar. "This is a fast-growing, fast-moving industry, and it is easy to hope that you could end up making a lot of money in a short period of time."
The more than 200 percent increase in stock value by chipmaker Nvidia – often regarded as AI’s leading representative – over the last year likely reinforces that optimism, Sotiroff noted.
Beyond Nvidia, AI is expected to yield a wider array of beneficiaries in the future, according to Tony Kim, head of the fundamental equities technology group at BlackRock. Kim manages two new AI-focused ETFs launched by BlackRock on Tuesday: the iShares A.I. Innovation and Tech Active ETF, and the iShares Technology Opportunities Active ETF.
BlackRock's first AI product, the $630 million iShares Future AI & Tech ETF, debuted in 2018 and currently trades just below a 52-week high reached on October 14.
While its initial AI product is index-linked, the two new offerings will be actively managed to capitalize on emerging AI opportunities, as explained by Jay Jacobs, head of active and thematic ETFs at BlackRock.
"The AI market is going to change dramatically," said Kim. "What you think it is today, isn't going to be what it becomes tomorrow or next year or in a few years."
Bank of America Securities analysts Ohsung Kwon and Savita Subramanian recently reported that they perceive "an AI arms race" among major tech firms like Microsoft and Amazon.com. They estimate that capital spending this year from four major companies heavily investing in AI will reach $206 billion, a 40 percent increase from 2023. In contrast, they project a slight dip in capital spending from the remaining 496 S&P 500 companies.
Additionally, venture capital firms are anticipated to funnel up to $79.2 billion into AI startups by year-end, marking a 27 percent rise from 2023, according to estimates from venture firm Accel. This projection indicates that 40 cents of every dollar invested by VC firms will go towards an AI company.
However, investing in an AI-themed ETF does not automatically lead to superior market performance. The largest AI fund, the Global X Artificial Intelligence & Technology ETF, has risen approximately 20 percent this year, compared to a 22 percent increase for the benchmark S&P 500.
Earlier this month, Amplify ETFs rebranded an existing cloud-computing ETF to emphasize its new focus on AI, renaming it the Amplify Bloomberg AI Value Chain ETF.
"Now, we're trying to get exposure to the cloud with a specific AI tilt," said Nathan Miller, vice president of product development at Amplify.
He added that the long-term objective is to be poised to profit when the anticipated capital spending on AI translates into earnings, allowing the firm to stay ahead in identifying new opportunities.
"Like every ETF firm out there, we are trying to offer investors something differentiated," Miller said.
Ramin Sohrabi for TROIB News
According to data from financial services firm Morningstar, over a third of the two dozen ETFs featuring artificial intelligence, or AI, in their titles have been introduced in 2024 alone.
In just the past week, three additional ETFs have entered the market, including a revamped cloud computing ETF specifically tailored to target AI. The AI ETF sector now boasts assets totaling $4.5 billion, nearing the $5.5 billion associated with nuclear power-themed ETFs and significantly exceeding the $1.37 billion found in the cannabis sector.
"I'm not surprised their ranks are multiplying," said Daniel Sotiroff, senior analyst at Morningstar. "This is a fast-growing, fast-moving industry, and it is easy to hope that you could end up making a lot of money in a short period of time."
The more than 200 percent increase in stock value by chipmaker Nvidia – often regarded as AI’s leading representative – over the last year likely reinforces that optimism, Sotiroff noted.
Beyond Nvidia, AI is expected to yield a wider array of beneficiaries in the future, according to Tony Kim, head of the fundamental equities technology group at BlackRock. Kim manages two new AI-focused ETFs launched by BlackRock on Tuesday: the iShares A.I. Innovation and Tech Active ETF, and the iShares Technology Opportunities Active ETF.
BlackRock's first AI product, the $630 million iShares Future AI & Tech ETF, debuted in 2018 and currently trades just below a 52-week high reached on October 14.
While its initial AI product is index-linked, the two new offerings will be actively managed to capitalize on emerging AI opportunities, as explained by Jay Jacobs, head of active and thematic ETFs at BlackRock.
"The AI market is going to change dramatically," said Kim. "What you think it is today, isn't going to be what it becomes tomorrow or next year or in a few years."
Bank of America Securities analysts Ohsung Kwon and Savita Subramanian recently reported that they perceive "an AI arms race" among major tech firms like Microsoft and Amazon.com. They estimate that capital spending this year from four major companies heavily investing in AI will reach $206 billion, a 40 percent increase from 2023. In contrast, they project a slight dip in capital spending from the remaining 496 S&P 500 companies.
Additionally, venture capital firms are anticipated to funnel up to $79.2 billion into AI startups by year-end, marking a 27 percent rise from 2023, according to estimates from venture firm Accel. This projection indicates that 40 cents of every dollar invested by VC firms will go towards an AI company.
However, investing in an AI-themed ETF does not automatically lead to superior market performance. The largest AI fund, the Global X Artificial Intelligence & Technology ETF, has risen approximately 20 percent this year, compared to a 22 percent increase for the benchmark S&P 500.
Earlier this month, Amplify ETFs rebranded an existing cloud-computing ETF to emphasize its new focus on AI, renaming it the Amplify Bloomberg AI Value Chain ETF.
"Now, we're trying to get exposure to the cloud with a specific AI tilt," said Nathan Miller, vice president of product development at Amplify.
He added that the long-term objective is to be poised to profit when the anticipated capital spending on AI translates into earnings, allowing the firm to stay ahead in identifying new opportunities.
"Like every ETF firm out there, we are trying to offer investors something differentiated," Miller said.
Ramin Sohrabi for TROIB News
