Investors Flock to AI-Themed ETFs Amid Nvidia’s Stellar Performance
The investment world is witnessing a modern-day gold rush as artificial intelligence (AI) takes center stage, with AI-themed exchange-traded funds (ETFs) becoming the new frontier for savvy investors. The allure of AI has been magnified by the impressive performance of tech giants like Nvidia, whose shares have seen a meteoric rise, drawing even more attention to this burgeoning sector.
According to recent Morningstar data, the total value of AI-themed ETFs traded in the United States has surged from $2.55 billion to $6.88 billion in just one year. This exponential growth is a testament to the increasing confidence investors have in AI’s potential to revolutionize various industries.
Will Rhind, the founder and CEO of GraniteShares, observes that “It’s still so early in the evolution of this category … that investors are still sorting through the possibilities.” This sentiment echoes the excitement that has historically surrounded transformative technologies, from the dotcom era to the rise of electric vehicles.
Nvidia, a company whose chips are widely regarded as the gold standard for AI applications, continues to be a focal point for investors. The GraniteShares 2x Long NVDA Daily ETF, which aims to deliver twice the daily return of Nvidia’s stock, saw its assets double to $2 billion earlier this month. This follows Nvidia’s nearly 80% increase in share value this year, building on a tripled share price in 2023.
The Themes Generative Artificial Intelligence ETF is another example of success in this niche, with its assets tripling to about $20 million. These funds are part of a broader trend that has seen collective inflows of $2.68 billion over the last 12 months into diversified AI-related ETFs.
Despite the impressive growth, there is debate over whether this surge represents a speculative bubble or a legitimate bull run. The S&P 500’s 8% rise year-to-date, bolstered by AI beneficiaries like Nvidia and Microsoft, adds to the optimism. However, some investors are diversifying their exposure away from stocks that have already experienced significant gains.
Rene Reyna, head of thematic ETF strategy at Invesco, notes that investors are “focused on finding new areas that will benefit from AI,” rather than just seeking the next big winner like Nvidia.
While ETFs continue to cater to diverse investor interests, not all AI-themed funds have found favor. The WisdomTree US AI Enhanced Value ETF, which uses AI to select its portfolio, has experienced outflows and underperformance, possibly due to its lack of positions in Nvidia and other key AI-related stocks.
As the AI landscape evolves, investors remain eager to capture growth in a sector that promises to redefine the technological capabilities of tomorrow.
