JPMorgan AI ETFs report puts the theme among top five by assets
JPMorgan Asset Management says AI-linked ETFs rank as a top-five theme by assets, even after second-quarter volatility hit the group.
By Theo Nakamura · Staff Writer
· 3 min read
JPMorgan AI ETFs are getting more attention from investors, according to J.P. Morgan Asset Management, which says artificial intelligence has become a top-five theme by assets under management in exchange-traded funds. For retail investors, that means AI exposure is no longer limited to picking individual tech stocks, since more money is sitting in funds built around the broader AI trade.
The finding comes from the firm’s July “Guide to ETFs,” discussed this week by Jon Maier, J.P. Morgan Asset Management’s chief ETF strategist, on CNBC’s “ETF Edge.” Maier led the insights team behind the report, according to CNBC.
An exchange-traded fund, or ETF, is a basket of securities that trades on an exchange like a stock. Assets under management, often shortened to AUM, means the total amount of investor money held in a fund or fund category.
J.P. Morgan Asset Management’s report found that AI-themed ETFs rank among the five largest thematic ETF areas by assets, CNBC reported. The growth has come even though the category was hit by volatility in the second quarter, a reminder that a popular theme can still move sharply when investor expectations shift.
What are AI ETFs investing in?
AI ETFs are funds designed to give investors exposure to companies tied to artificial intelligence. Based on Maier’s comments to CNBC, that exposure can go beyond software and chip names to include the infrastructure that supports AI, such as applications, energy needs and AI models.
Maier said many thematic investment areas are becoming more connected to AI and the broader ecosystem around it, according to CNBC. He also pointed to overlap between AI-focused ETFs and infrastructure funds, because building and running AI systems depends on physical and digital capacity.
That overlap matters for investors who use ETFs to express a view on a theme. A fund with “AI” in the strategy may not track only one type of company, and a fund focused on infrastructure may still carry AI-related exposure if its holdings are tied to data centers, energy demand or other parts of the buildout.
Why are ETFs taking money from mutual funds?
J.P. Morgan Asset Management’s guide also found that overall inflows into mutual funds are slowing, while more money is moving into ETFs, according to CNBC. Maier said the report’s data showed mutual funds have had negative overall inflows in recent years.
A mutual fund is another pooled investment vehicle, but it typically prices once per trading day and can distribute taxable capital gains to shareholders. An ETF trades during the market day and is often structured in a way that can reduce capital gains distributions.
Maier told CNBC that ETFs have become more appealing to retail investors partly because of tax treatment. He said ETFs typically do not pay a capital gains tax distribution in the way mutual funds can.
He contrasted that with a mutual fund investor who bought in 2022, suffered a decline of 20%, 30% or 40% depending on the market segment, and still received a 6% capital gain, according to CNBC. His point was that tax bills can feel especially painful when the investment itself has fallen.
The report does not mean every AI ETF has performed well, and CNBC noted that volatility hit the group in the second quarter. It does show that Wall Street’s ETF business is giving investors more ways to access AI as a theme, while the broader shift from mutual funds to ETFs continues.
This story draws on original reporting from CNBC.
