- Against the backdrop of rapid global advancements in artificial intelligence technology, asset management companies are launching new exchange-traded funds (ETFs) to meet investors’ enthusiasm for investing in the AI sector.
- One-third of the two dozen ETFs that include AI were launched in 2024, and this sector now manages assets amounting to $4.5 billion.
- BlackRock’s newly launched AI-themed ETFs aim to capture emerging opportunities. Amplify ETFs has rebranded its cloud computing ETF to focus on the AI sector.
What happened
AI technology is developing quickly around the world. As a result, asset management companies are launching new exchange-traded funds (ETFs) to take advantage of the market’s excitement about AI. Morningstar data shows that in 2024, companies launched many new ETFs. More than one-third of these ETFs had “artificial intelligence” or “AI” in their names. The AI ETF group now has $4.5 billion in assets, closer to the $5.5 billion nuclear-themed ETF universe. It also far exceeds the cannabis sector, which has $1.37 billion in assets.
Kim is the manager of BlackRock’s two new AI-themed ETFs launched on Tuesday, which are the iShares A.I. Innovation and Tech Active ETF and the iShares Technology Opportunities Active ETF. Unlike BlackRock’s initial AI product, the iShares Future AI & Tech ETF. Fund managers actively manage these two new funds. This means they will change their investment portfolios based on market shifts and how AI technology develops. In order to achieve better returns.
AI ETFs are growing quickly. However, investing in AI-themed ETFs does not always mean better performance than the overall market. The largest artificial intelligence fund, Global X Artificial Intelligence & Technology ETF. So far this year, it has risen by about 20%, while the benchmark S&P 500 index has risen by 22%.
Bank of America analysts Ohsung Kwon and Savita Subramanian said there is an “AI arms race.” Big tech companies like Microsoft and Amazon are competing in this race. They expect that these companies’ capital expenditures on AI will reach $206 billion this year, a 40% increase compared to 2023.
Also read: Why is there now an ETF for everything? Exploring the rise and diversity of ETFs
Also read: US bond ETF launches up 50% from year-ago levels
Why it is important
With the launch of AI ETFs, more individual and institutional investors can easily enter the AI market. This could increase the market’s liquidity and overall scale. The launch of the new AI ETF provides investors with more investment options, allowing them to invest in the entire AI industry through a single product. Instead of investing in a few individual companies, this helps to diversify risk. The surge in AI ETFs reflects the market’s recognition of the future growth potential of AI technology. This growth may drive the expansion of related companies and the entire industry. Its growth indicates that investors are optimistic about the long-term growth of the AI industry. This could influence future investment trends and market dynamics. At the same time, it also reminds investors to pay attention to the investment risks related to AI, including the uncertainty of technological changes, market volatility, and industry competition.
