Investor enthusiasm for artificial intelligence (AI) is fueling a frenzy into AI-themed Exchange-Traded Funds (ETFs) as they seek new avenues to engage with this burgeoning technology, following remarkable surges in stocks like Nvidia. These ETFs vary widely, ranging from those encompassing major AI beneficiaries to niche themes such as robotics and sound generation. The universe of AI-themed ETFs in the United States has swelled to $6.88 billion by February’s end, up from $2.55 billion a year earlier, according to Morningstar data.
Will Rhind, GraniteShares’ founder and CEO, remarked, “It’s still so early in the evolution of this category… that investors are still sorting through the possibilities.” The enthusiasm echoes past waves of excitement for transformative technologies like dotcom stocks and electric vehicles, which brought substantial new businesses to the economy and created immense wealth, but also saw eventual stock price declines for some market favorites.
Currently, investors are eagerly responding, with Nvidia, renowned for its AI chips, continuing to command attention. Assets in the GraniteShares 2x Long NVDA Daily ETF doubled to $2 billion this month. The company recently introduced the Blackwell B200, an AI chip reportedly up to 30 times faster than its predecessor, at its developer conference.
Even smaller ETFs are prospering. Assets in the Themes Generative Artificial Intelligence ETF tripled to about $20 million from $7.5 million. Seven out of 18 diversified AI-related ETFs tracked by Morningstar have launched within the past three years, with collective inflows of $2.68 billion in the last 12 months, nearly doubling the inflows into global real estate ETFs.
The S&P 500’s nearly 8% year-to-date rise, partly fueled by AI beneficiaries like Nvidia and Microsoft, reflects the current AI fervor. However, concerns persist about whether this excitement is inflating a bubble or merely contributing to a strong bull market.
Some investors are diversifying away from stocks like Nvidia, evident in the growth of ETFs limiting exposure to such companies. Others are exploring new AI-related areas for growth, like the integration of AI and smartphones or less-crowded sub-themes.
ETF providers are also racing to cater to diverse preferences, with some like Robo Global Robotics & Automation ETF supplementing Nvidia exposure with other AI-benefitting stocks. Yet, certain AI-themed ETFs, like the WisdomTree US AI Enhanced Value ETF, have struggled to attract investors, possibly due to their lack of exposure to Nvidia and other AI-related stocks.
