The buzz around artificial intelligence is louder than ever, and asset managers are seizing the moment by launching a slew of new AI-focused ETFs (Exchange-Traded Funds). 📊 As investors flock to tap into the AI craze, the market is buzzing with excitement about which companies will dominate the tech revolution.
According to Morningstar, over one-third of the approximately two dozen ETFs with \"AI\" in their name were launched just this year, 2024. In the past week alone, three new ETFs joined the ranks, including a revamped cloud computing ETF now specifically targeting AI.
Currently, the AI ETF group boasts assets totaling $4.5 billion, nearing the $5.5 billion mark of the nuclear power-themed ETF universe and surpassing the cannabis sector, which holds $1.37 billion in assets.
\"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 meteoric rise of chipmaker Nvidia—AI's poster child—with a 200%+ stock gain over the last year has fueled this optimism, Sotiroff added.
Looking ahead, Tony Kim, head of the fundamental equities technology group at BlackRock, believes AI will benefit a wider array of companies. On Tuesday, BlackRock launched two new AI-themed ETFs: the iShares A.I. Innovation and Tech Active ETF and the iShares Technology Opportunities Active ETF.
The firm's first AI product, the iShares Future AI & Tech ETF, launched in 2018 and is currently trading just below a 52-week high recorded on October 14.
Unlike its initial offering, the new funds are actively managed to capture emerging opportunities within AI. Jay Jacobs, head of active and thematic ETFs at BlackRock, explained, \"The AI market is going to change dramatically. What you think it is today, isn't going to be what it becomes tomorrow or next year or in a few years.\" 🤖🔮
Market analysts from Bank of America Securities, Ohsung Kwon and Savita Subramanian, highlighted an \"AI arms race\" among tech giants like Microsoft and Amazon. They estimate that capital spending from four major companies making big AI bets will reach $206 billion this year, a 40% increase from 2023.
Venture capital is also pouring into AI, with firms directing up to $79.2 billion in funding to AI startups by the end of the year, a 27% jump from 2023, according to Accel. That means nearly half of all VC investments are now funneled into AI companies.
However, investing in AI-themed ETFs doesn't guarantee outperforming the market. For instance, the largest AI fund, the Global X Artificial Intelligence & Technology ETF, is up about 20% this year, slightly trailing the S&P 500's 22% rise.
Earlier this month, Amplify ETFs rebranded an existing cloud-computing ETF to focus on AI, renaming it the Amplify Bloomberg AI Value Chain ETF. Nathan Miller, vice president of product development at Amplify, said, \"Now, we're trying to get exposure to the cloud with a specific AI tilt.\" ☁️✨
The long-term goal is to be ready to profit as AI investments start impacting earnings and to stay ahead of new opportunities. \"Like every ETF firm out there, we are trying to offer investors something differentiated,\" Miller added.
