AI-focused ETFs are holding firm despite market chatter of an “AI bubble” gaining steam.
Allaying fears among investors, BlackRock’s Global Fixed Income CIO Rick Rieder assured that he does not see signs of overheating in the public markets and that mega-cap tech leaders at the heart of the AI boom, such as Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc (NASDAQ:META) and Alphabet Inc (NASDAQ:GOOGL)(NASDAQ:GOOG), are backed up by real earnings, not speculation.
• AIQ is gathering positive momentum. Stay ahead of the curve here.
These businesses are producing record levels of free cash flow and have strong balance sheets, conditions that differentiate today’s AI surge from the dot-com mania of the early 2000s, Rieder pointed out in an interview with Yahoo Finance.
His comments reinforce a growing belief that AI’s market momentum, while intense, rests on solid fundamentals rather than hype.
AI ETFs Hold Their Footing
The Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) and iShares Future AI & Tech ETF (NYSE:ARTY) are some of the biggest options for investors looking to diversify into AI.
AIQ relies heavily on profitable, established tech giants such as Microsoft, Alphabet and Meta, giving it the kind of earnings support Rieder highlighted. AIQ has garnered around $3.3 billion in inflows this year thus far, according to data aggregated by ETF Database.
On the other hand, ARTY focuses on companies expected to benefit from long-term advances in artificial intelligence, robotics and automation. Its portfolio consists of the likes of NVIDIA Corp (NASDAQ:NVDA), Advanced Micro Devices Inc (NASDAQ:AMD) and Broadcom Inc (NASDAQ:AVGO), which are semiconductor powerhouses that continue to underpin growth for AI infrastructure. The fund's mix of established chipmakers and emerging innovators means it captures a balanced play between current earnings strength and future AI potential.
Other thematic funds, such as the Roundhill Generative AI & Technology ETF (NYSE:CHAT) and WisdomTree Artificial Intelligence and Innovation Fund (BATS:WTAI), are pulling in money this year as investors look beyond the megacaps for emerging AI opportunities. CHAT, for example, tracks companies directly involved in generative AI and software automation, providing a more concentrated bet on the next growth phase of AI.
A Bubble Or Just Big Cash?
While some analysts warn the valuations across AI-linked stocks are stretched, the stance of Rieder and continued inflows into AI ETFs suggest investors still view the theme as underpinned by durable corporate performance.
Not only Rieder, Goldman Sachs analysts and Wedbush’s Global Head of Tech Research Dan Ives also echo this same sentiment. In a report shared Monday by Goldman Sachs, analysts Dominic Wilson and Vickie Chang said that although the AI sector is hot now, it is not in meltdown mode yet.
Last week, Ives stated tech stocks will rally into the year-end even as AI valuation concerns grip markets.
As Nvidia’s soaring chip sales and Microsoft’s expanding dominance in the AI cloud translate, ETF investors seem to be betting this boom has more substance than smoke. For investors leery of single stock risk, diversified AI ETFs full of high-cash-flow names might remain a safer, more balanced method of riding the next wave of AI innovation.
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