Home Most Popular Exploring the AI Revolution: The Rise of Nvidia and the Rush into AI-themed ETFs

Exploring the AI Revolution: The Rise of Nvidia and the Rush into AI-themed ETFs


A Glittering Age for AI-themed ETFs

The allure of artificial intelligence (AI) has set off a frenzy of activity in AI-themed ETFs, as investors clamor for new avenues to navigate the flourishing technological landscape, following the meteoric surges in companies like Nvidia.

From conglomerates featuring top AI performers to specialized areas such as robotics and sound engineering, the AI ETF market in the United States has surged from $2.55 billion a year prior to an impressive $6.88 billion as of February’s end, as per Morningstar data.

Shaping the Future of Tech Investing

Will Rhind, GraniteShares’ founder and CEO, mused on the nascent stage of this investment category, highlighting the evolving nature of the landscape as investors grapple with the myriad possibilities.

The current fervor surrounding AI funds evokes memories of past technological frenzies, such as the dotcom era and the rise of electric vehicles. While these waves introduced groundbreaking companies and generated immense wealth, they also harbored cautionary tales of subsequent price collapses, a potential fate for today’s AI champions.

For the time being, investors are embracing the excitement, with Nvidia, renowned for its cutting-edge AI chips, continuing to command the market’s attention.

Unveiling the Future

At a recent developer conference, Nvidia stunned the industry by introducing the Blackwell B200, a new AI chip boasting speeds up to 30 times faster than its predecessor – a move that further solidified the company’s dominance in the sector.

Even smaller ETFs are reaping the benefits of this AI boom. Assets in the Themes Generative Artificial Intelligence ETF surged threefold to approximately $20 million, as investors voraciously seek exposure to this transformative technology.

Investor Optimism and Caution

With seven of Morningstar’s 18 diversified AI-related ETFs launching in the past three years and another revamped to hone in on AI, the sector has experienced inflows of $2.68 billion over the last 12 months – nearly double that of global real estate ETFs, signaling a significant shift in investor sensibilities.

The escalating excitement around AI and its diverse applications has driven remarkable gains in the S&P 500, led by companies like Nvidia and Microsoft, further fueling speculative upticks across various industries.

Diversification Strategies in the AI Ecosystem

Some investors are wary of concentrated exposure to high-flying stocks like Nvidia, preferring a more balanced approach. Global X’s AI-focused ETF, capping Nvidia’s allocation at 3%, has witnessed substantial growth in the past quarter.

Conversely, funds with larger Nvidia stakes, like Robotics and Artificial Intelligence ETF, have shown more tempered expansion, underscoring investor risk appetite and diversification strategies in navigating the AI terrain.

Future Prospects and Cautionary Tales

Analysts at Morgan Stanley have identified a wide array of stocks poised to benefit from AI, including unexpected candidates like Walmart and Caterpillar. They also suggest exploring niche areas like AI integration with smartphones for untapped potential.

Amidst the proliferation of AI-themed ETFs targeting diverse market segments, there have been winners and losers. While some funds have flourished, others, like the WisdomTree US AI Enhanced Value ETF, have struggled due to lackluster performance, underscoring the pitfalls of overlooking pivotal AI players like Nvidia.

AI enthusiasm sparks ETF asset growth https://reut.rs/48Z03Tg

Nvidia unveils flagship AI chip, the B200, aiming to extend dominance

(Reporting by Suzanne McGee in New York Additional reporting by Lewis Krauskopf in New York Editing by Ira Iosebashvili and Matthew Lewis)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.