Recently, the frenzy surrounding artificial intelligence has sparked a gold rush for artificial intelligence-themed ETFs.$NVIDIA (NVDA.US)$Investors expect to invest in this emerging technology through this new approach after a spectacular rebound from the darling of the market.
These funds cover a wide range of topics, from the biggest AI investors to more esoteric topics such as robotics and sound generation. According to data from Morningstar, by the end of February, the total amount of artificial intelligence-themed ETFs traded in the US had soared from US$2.55 billion a year ago to US$6.88 billion.
“The development of this category is still in its early stages... investors are still sifting through the possibilities,” said Will Rhyd, founder and CEO of GraniteShares.
The boom surrounding artificial intelligence funds echoes previous investors' excitement about other technologies seen as transformative (from the internet to electric vehicles).
Each wave brings significant new business to the economy and creates amazing wealth for founders such as Bezos and Musk, as well as ordinary investors. However, it is worth noting that many companies whose stock prices soared during previous market booms eventually experienced falling stock prices.
But for now, investors are still reacting enthusiastically, and Nvidia — whose chips are considered the gold standard in the field of artificial intelligence — continues to be the focus of attention.
$GraniteShares 2x Long NVDA Daily ETF (NVDL.US)$The assets doubled to $2 billion earlier this month. The ETF aims to provide a daily return of twice the chipmaker's stock and is not included in Morningstar's data on artificial intelligence-themed funds. Prior to these capital inflows, Nvidia's stock price had risen nearly 80% this year so far, and the company's share price tripled in 2023.
Smaller ETFs are also booming.$THEMES GENERATIVE ARTIFICIAL INTELLIGENCE ETF (WISE.US)$Investment strategist Taylor Krystkowiak said that the ETF's assets have tripled from $7.5 million earlier this month to around $20 million.
Of the 18 diversified artificial intelligence-related ETFs tracked by Morningstar, only 7 were launched within the past three years. Only the eighth has been redesigned to target artificial intelligence more directly.
According to Morningstar's data, the total capital inflow of these funds over the past 12 months was US$2.68 billion. This is almost double the amount flowing into global real estate ETFs, the company said.
It is unclear whether investors' excitement about the future of artificial intelligence is fueling the bubble or just driving a strong bull market in the stock market.
Since this year,$S&P 500 Index (.SPX.US)$That's up nearly 8%, partly due to Nvidia and the 24% increase last year$Microsoft (MSFT.US)$Wait until the beneficiaries of artificial intelligence continue to rise. Artificial intelligence fervor has also driven the parabolic trend of other companies' stock prices, including those included in the S&P 500 index this week, which rose more than 250%$Super Micro Computer (SMCI.US)$.
After the surge, some investors seem to be limiting their exposure to Nvidia and other highly volatile stocks. ETF publisher Global X discovered that its$Global X Artificial Intelligence & Technology ETF (AIQ.US)$The size has tripled in the past three months, but the ETF limited Nvidia's exposure to 3%.
In contrast, its$Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ.US)$(More than 20% of its assets are invested in this chipmaker) grew 20%.
Others are focused on finding new areas that will benefit from artificial intelligence, said Rene Reyna, head of strategy for Invesco Themed ETFs and Invesco AI and Next Gen Software ETF manager.
“Our conversations with investors are not focused on finding the next Nvidia, but on recognizing that these technologies are changing the market landscape and finding ways to take a share of this growth,” he said.
Morgan Stanley analysts last week published a list of 480 individual stocks likely to benefit from artificial intelligence. Less obvious beneficiaries include$Walmart (WMT.US)$und$Caterpillar (CAT.US)$. The bank also suggests exploring “less crowded sub-topics” such as the integration of artificial intelligence and smartphones.
On the other hand, ETFs are also scrambling to provide various types of products.$Robo-Stox Global Robotics And A (ROBO.US)$While holding Nvidia shares, it also holds shares that are expected to benefit from artificial intelligence technology, such as$Intuitive Surgical (ISRG.US)$.$ROUNDHILL GENERATIVE AI & TECHNOLOGY ETF (CHAT.US)$Focus on companies that are expected to be the beneficiaries of generative artificial intelligence, including$Salesforce (CRM.US)$und$Marvell Technology (MRVL.US)$.
Despite this, at least one AI-based ETF failed to win over investors. Using artificial intelligence to select their portfolios$WISDOMTREE U.S. AI ENHANCED VALUE FUND (AIVL.US)$There was an outflow of $48.26 million over the past 12 months, which lags behind the S&P 500 index.
One possible reason for the poor performance of this fund and other similar funds is that many of these funds lack positions in Nvidia and other AI-related stocks.
edit/new