AI ETF Boom Draws Big Investors Amid Rapid Market Growth

California: Artificial intelligence is the buzzword driving a surge in exchange-traded funds, as asset managers roll out new funds to capture AI hype. Over one-third of the two dozen AI-focused ETFs launched this year have already drawn $4.5 billion in assets-far from the $5.5 billion held by nuclear power-themed ETFs, but well ahead of the $1.37 billion in assets held by cannabis sector ETFs.

It has reflected the momentum for AI through its stock performance, which has soared to a 200% mark within the last year, thereby winning investors’ confidence. BlackRock, one of the technology groups, has entered into the AI ETF fray through the launch of two funds during this week iShares A.I. Innovation and Tech Active ETF and the iShares Technology Opportunities Active ETF-that seek promising companies leveraging on AI. “With these companies changing so fast leading companies in five years, who knows what they might be?” Tony Kim, a head of tech equities at BlackRock, recently said.

But it’s not just BlackRock getting in on the action. Major tech players like Microsoft and Amazon are in what BofA Securities analysts call an “AI arms race,” projected to pour $206 billion into AI development this year—a massive 40% increase over last year. Venture capital is following suit, with funding for AI startups expected to reach $79.2 billion by year’s end, marking a significant 27% boost.

While the market is bullish, returns are not assured. For example, the Global X Artificial Intelligence & Technology ETF has risen 20% this year, behind the S&P 500’s 22% gain. Amplify ETFs recently renamed its cloud computing ETF the Amplify Bloomberg AI Value Chain ETF, a reflection of the trend toward more targeted AI exposure. According to Amplify’s Nathan Miller, these ETFs are shaping to put investors at the forefront and ready to capitalize as AI spending turns into real earnings.

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