May 25, 2023
AI-Focused ETF Assets Could Triple to $35 billion by 2030
(Bloomberg) -- Exchange-traded funds tracking companies that are linked to artificial intelligence may see their assets grow three-fold to $35 billion by 2030, a report by Bloomberg Intelligence shows.
The number of these types of ETFs may also amount to more than 150 globally from the current count of 56, BI’s Rebecca Sin and Breanne Dougherty said. China, they predict, may be the biggest destination for funds thanks to the nation’s “robust AI effort” despite having only three robotics-focused ETFs with roughly $67 million in assets.
Hype around AI — loosely defined as problem solving using computers and big datasets — has soared since the launch of OpenAI Inc.’s ChatGPT last year, sparking a race among companies to capitalize on the phenomenon. On Thursday, a bullish sales forecast related to AI from Nvidia Corp. propelled its market capitalization to the cusp of $1 trillion, and led gains in the technology sector.
“AI ETFs could expand amid the growth in AI and ChatGPT as companies like Nvidia embrace demand for the technology,” the strategists wrote in a Thursday note. “AI ETFs could keep trending upward in terms of flow and performance, we believe.”
The explosive rally in shares of Nvidia, the world’s most valuable chipmaker, reinforces the demand for AI processors and the investor appetite for AI-related innovations.
“The way that we use and implement AI across all businesses is going to be transformational,” Louise Goudy Willmering, partner at Crewe Advisors, said by phone. “It truly demonstrates the power of the computing because it can do things that we didn’t realize were readily available to us.”
In the US, there are over a dozen US-listed equity ETFs with “artificial intelligence” in their fund descriptions that are tracked by Bloomberg. These funds have pulled in cash every month this year to the tune of $339 million. Almost half of those inflows went to the $2 billion Global X Robotics & Artificial Intelligence ETF (BOTZ), the largest AI-focused ETF.
One AI-related fund launched in the US in 2023, the $12.5 million Roundhill Generative AI & Technology ETF (CHAT). The actively-managed fund will invest mostly in companies that derive portions of their revenue or profit from generative AI. Two more were filed, according to a database tracked by Bloomberg Intelligence’s Henry Jim.
Interestingly, ETFs that track AI companies have outperformed AI-powered funds. The $105 million AI Powered Equity ETF (AIEQ) has rallied about 2% so far this year. The ETF uses a quantitative model running on IBM Corp.’s Watson platform to scan thousands of US companies. That pales in comparison to a roughly 8% climb for the S&P 500.
The BI analysts say a potential reason could be the difference in the weighting of companies. Nvidia, for instance, has returned 160% year-to-date, while Microsoft Corp. and Alphabet Inc have posted gains north of 30%.
--With assistance from Katie Greifeld.
©2023 Bloomberg L.P.