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AI ETFs launched so far in 2024 account for over a third

all

ETFs focused on AI

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BlackRock's ( BLK ) new AI ETFs aim to capture emerging

opportunities

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Venture capital firms to invest $79.2 billion in AI

startups by

year-end, Accel says

By Suzanne McGee

Oct 28 (Reuters) - Exchange-traded funds focused on

artificial intelligence are proliferating as asset managers

offer investors new ways to tap in to the market enthusiasm for

AI, even while it remains unclear which companies will emerge as

the long-term winners from the latest technology revolution.

More than one-third of the two dozen ETFs that include

artificial intelligence or AI in their name have been launched

in 2024 alone, according to data from Morningstar.

In the past week, three more joined their ranks, including a

cloud computing ETF rebranded and revamped to specifically

target AI. The AI ETF group now has assets of $4.5 billion,

drawing it closer to the $5.5 billion nuclear power-themed ETF

universe, and pushing it well above the cannabis sector, with

$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 200%-plus stock gain by chipmaker Nvidia ( NVDA ) - AI's

poster child - over the last 12 months likely just reaffirms

that confidence, Sotiroff said.

Beyond Nvidia ( NVDA ), AI is likely to produce a larger and broader

swath of beneficiaries in the future, said Tony Kim, head of the

fundamental equities technology group at BlackRock ( BLK ). Kim

is the manager of the two new AI-themed ETFs launched by

BlackRock ( BLK ) on Tuesday, the iShares A.I. Innovation and Tech

Active ETF and the iShares Technology Opportunities

Active ETF.

The first of the firm's AI products, the $630 million

iShares Future AI & Tech ETF, launched in 2018,

currently trades just below a 52-week high recorded on Oct. 14.

While its initial AI product is linked to an index, the two

new funds are actively managed and designed to capture emerging

opportunities within AI, according to Jay Jacobs, head of active

and thematic ETFs at BlackRock ( BLK ).

"The AI market is going to change dramatically," said Kim.

"What you think it is today, isn't going to be what it becomes

tomorrow or next year or in a few years."

ARMS RACE

BofA Securities market analysts Ohsung Kwon and Savita

Subramanian said in a recent report they believe there is "an AI

arms race" under way among giant technology companies like

Microsoft ( MSFT ) and Amazon.com ( AMZN ). They calculate that

capital spending this year from four megacaps making big AI bets

will total $206 billion, up 40% over 2023. Meanwhile, capital

spending by the other 496 companies in the S&P 500 will

dip slightly, they project.

Venture capital firms also are directing as much as $79.2

billion in funding to AI startups by the end of the year, 27%

above 2023 levels, according to an estimate from venture firm

Accel. That means that 40 cents of every dollar invested by VC

firms will go to an AI company.

Of course, investing in an AI-themed ETF does not guarantee

market outperformance. The largest of the AI funds, the Global X

Artificial Intelligence & Technology ETF, is up about

20% so far this year, against a 22% rise for the benchmark S&P

500.

Amplify ETFs earlier this month rebranded an existing

cloud-computing ETF to reflect a new focus on the emerging

technology, naming it the Amplify Bloomberg AI Value Chain ETF

.

"Now, we're trying to get exposure to the cloud with a

specific AI tilt," said Nathan Miller, vice president of product

development at Amplify.

The long-term goal, he added, is to be ready to profit if

and when all that capital spending on AI starts to show up in

earnings, and be ahead of the curve in identifying new

opportunities.

"Like every ETF firm out there, we are trying to offer

investors something differentiated," Miller said.