Asset managers roll out new ETFs to cash in on AI hype
Asset managers roll out new ETFs to cash in on AI hype
Artificial intelligence-focused exchange-traded funds are changing the face of investments since asset managers launched new products to capture growing market excitement. One-third of the 24 ETFs whose titles comprised "artificial intelligence" or "AI," according to Morningstar data, have appeared this year alone. Last week alone, three ETFs debuted in the United States, including an existing cloud computing ETF under a new brand name. It is specifically targeting the field of A.
The total investment in AI-focused ETFs stands at approximately $4.5 billion, inching closer to the approximate $5.5 billion invested in ETFs related to nuclear power, while it is nearly ten times that of ETFs invested in the cannabis sector, which stands at about $1.37 billion. This progress comes at a time where asset managers are keenly looking forward to providing alternative and unique investment opportunities with new, rapidly changing technologies in the financial sector .
Major News
New Products at BlackRock
BlackRock is launching the two new actively managed, AI-themed ETFs as follows: the iShares A.I. Innovation and Tech Active ETF and the iShares Technology Opportunities Active ETF, both focusing on emerging AI opportunities following the success of earlier product iShares Future AI & Tech ETF, in trading since 2018 and trading at a recent 52-week high.
Market Dynamics
BofA Securities analysts have termed the present scenario as an "AI arms race" among key tech companies like Microsoft and Amazon. According to analysts, these companies will be expected to spend $206 billion on AI projects in the current year, 40% higher compared to 2023. Venture capital investment in AI startups is estimated to increase to $79.2 billion this year, which points to increased interest in the sector .
Performance Prospect
Though everyone is thrilled about AI ETFs, it is essential to note that investment in the funds does not ensure above-average returns. For instance, the biggest AI fund, the Global X Artificial Intelligence & Technology ETF, has gone up by about 20% this year, lagging behind the 22% gain of the benchmark S&P 500.
Performance and Assets
AI ETFs
The AI ETF segment has attracted some $4.5 billion in AUM. Expansion in that area accelerated in 2024, when more than one-third of all AI ETFs launched. In fact, the largest AI fund, the Global X Artificial Intelligence & Technology ETF, has increased by almost 20% this year, a hair behind the 22% advance of the S&P 500.
Other Technology ETFs
General ETFs that are primarily technological-based tend to include more constituents, such as companies who are not necessarily tied up in AI. Take Invesco QQQ. This ETF tracks the Nasdaq-100. Since it includes most major technologies that are investing significantly into AI, like Apple or Microsoft, it has often been seen to have slightly more stable performance compared with niche AI funds.
Reflecting investor interest and an asset manager's strategic response to the shift in market demand, the proliferation of AI-focused ETFs has been swift. As technology continues to advance, these funds are expected to be pivotal for guiding investment strategies towards future growth opportunities in the AI sector.
