AI-Focused ETFs grow rapidly in 2024
The surge in AI exchange-traded funds (ETFs) reflects the growing investor enthusiasm for AI as fund managers launch new options to capture market interest. According to Morningstar, over a third of the AI-focused ETFs on the market were introduced in 2024, raising total assets in this category to $4.5 billion—close to the $5.5 billion held by nuclear-themed ETFs and far outpacing the $1.37 billion in cannabis funds. This growth is partially driven by high-profile gains, like chipmaker Nvidia’s stock surge of over 200% in the last year, which underscores AI’s profit potential, said Morningstar senior analyst Daniel Sotiroff.
BlackRock has added two new actively managed AI ETFs to its lineup, aiming to capture emerging opportunities in AI as the technology evolves. “The AI market is going to change dramatically,” noted Tony Kim of BlackRock, highlighting that what AI represents today will continue to shift. Bank of America analysts agree, describing the competition in AI among tech giants like Microsoft and Amazon as an “arms race.” This year, capital spending on AI by these firms is expected to total $206 billion, marking a 40% increase over last year, while venture capital funding for AI startups is projected to rise 27%, reaching $79.2 billion.
Despite the enthusiasm, AI-focused funds haven’t consistently outperformed the broader market; for instance, the Global X Artificial Intelligence & Technology ETF has gained about 20% in 2024, trailing the S&P 500’s 22% rise. Amplify ETFs recently shifted an existing cloud-computing ETF to focus on AI opportunities, illustrating the industry’s shift toward differentiating AI investment strategies. Nathan Miller of Amplify said that capturing the potential of AI-related capital spending remains a priority for long-term growth.