Alphabet Inc.’s (NASDAQ:GOOGL) sprint toward a $4 trillion valuation lit up Wall Street on Tuesday, yet AI-focused ETFs sat out the celebration. Google shares jumped on Tuesday following a report indicating that Meta Platform Inc. (NASDAQ:META) may use Google's AI chips in its data centers. A powerful year-long rally fueled by its sharpened AI strategy and buzz around its Gemini model was also driving the momentum. But even as Alphabet soared, the ETFs built to track the artificial intelligence boom traded in the red, weighed down by the one stock that usually powers them higher: Nvidia Corp (NASDAQ:NVDA).
Nvidia's Slide Knocks SMH And SOXX Off Balance
The real pressure point came from semiconductors. Nvidia fell more than 5%, while Advanced Micro Devices Inc. (NASDAQ:AMD) dropped nearly 7%, leaving chip-heavy vehicles like the VanEck Semiconductor ETF (NASDAQ:SMH) and the iShares Semiconductor ETF (NASDAQ:SOXX) struggling to find their footing. Both funds, which were down by more than 1%, are anchored in the belief that Nvidia’s GPUs remain the unchallenged backbone of the AI arms race. That narrative wobbled after reports that Meta is in talks to spend billions on Google’s tensor processing units, potentially beginning in 2027.
A Meta–Google deal would signal that Alphabet’s in-house silicon is emerging as a credible alternative, raising questions about the durability of Nvidia’s dominance, and by extension, the stability of ETFs built around it.
QQQ Weathers The Storm With Mega-Cap Cushioning
Invesco QQQ Trust (NASDAQ:QQQ): A different story altogether, QQQ also has exposure to Nvidia, but heavy weightings to Alphabet and other mega-cap platforms softened the blow. The fund inched up about 0.3% as of writing. The mega-cap surge offset much of the weakness in the semiconductor complex, underscoring the resilience of broad tech exposure on a day when hardware names were sagging.
AIQ, CHAT Fail To Keep Up With Google’s AI Momentum
Pure-play AI thematic funds did not fare much better. The Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) and the Roundhill Generative AI ETF (NYSE:CHAT) slipped 0.5% and 1.1% respectively, even with the bullish backdrop surrounding Alphabet. Their structures offer limited direct upside from Google-specific breakthroughs while staying sensitive, either directly or through sentiment, to Nvidia’s pullbacks.
A Day That Exposed A New Fault Line In AI Investing
Tuesday delivered one unusual sight: an AI megacap hitting escape velocity while AI-themed ETFs stayed grounded. This divergence suggests that the AI trade is evolving and that platform giants like Alphabet may surge on breakthroughs the ETF ecosystem isn’t yet built to capture.
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