Thematic ETFs: Navigating the AI Investment Surge

Artificial intelligence (AI) has emerged as a significant driver of investment in thematic exchange-traded funds (ETFs), attracting substantial capital from retail investors. As of 2025, nearly 400 thematic ETFs have been classified by ETF Action, with a notable focus on disruptive technologies, including AI, quantum computing, and clean energy. Thematic ETFs, while offering potential for high returns, also carry inherent risks due to their volatility and sector-specific focus.

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The Nasdaq Composite Index has recently shown signs of vulnerability, experiencing a decline that has raised concerns among investors. The index has posted three consecutive losing sessions and is nearing a critical threshold below its 50-day moving average. Despite this, the Nasdaq remains less than 5% off its all-time high, having gained approximately 250% since the lows observed during the COVID-19 pandemic.

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In 2025, the thematic ETF market has seen an influx of capital, with AI-focused ETFs alone attracting nearly $20 billion in flows. The Global X Artificial Intelligence & Technology ETF (AIQ) has grown to approximately $7 billion in assets, while the Robotics & Artificial Intelligence ETF (BOTZ) has reached around $3 billion. Other notable ETFs include the iShares AI Innovation and Technology (BAI) with $7.6 billion in assets and the Roundhill Generative AI & Technology (CHAT), which has seen a year-to-date performance of 55%.

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Experts caution that while thematic ETFs can yield significant gains, they are also subject to rapid declines. Mike Akins, founding partner at ETF Action, emphasizes the importance of understanding the lifecycle of investment themes, noting that some, like cloud computing, have experienced substantial outflows as their growth potential matures. Investors are advised to conduct thorough research and be prepared for short-term volatility when engaging with these funds.

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Akins describes the growth of the ETF market as "overwhelmingly positive" for investors, yet he acknowledges that the increasing number of options introduces additional risks. He highlights the necessity for investors to seize opportunities while being mindful of the potential for themes to lose momentum over time.

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Critics of thematic investing point out that the focus on specific sectors can lead to significant tracking errors and performance disparities among ETFs. Akins notes a performance spread of 60% among the 18 AI-focused ETFs, underscoring the need for careful selection.

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As the ETF market continues to expand, investors must remain vigilant and informed. The ability to navigate the complexities of thematic investing, particularly in high-growth areas like AI, will be crucial for capitalizing on potential opportunities while managing associated risks. The evolving landscape of thematic ETFs presents both challenges and prospects for investors willing to engage with this dynamic market.

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• “AI disruptive tech has seen almost $20 billion in flows year to date,” — Mike Akins, Founding Partner, ETF Action

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• “I think every theme is unique to itself, so some are going to play out longer than others,” — Mike Akins, Founding Partner, ETF Action

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• “You still want to have an allocation to the theme, but maybe take some off the top,” — Mike Akins, Founding Partner, ETF Action

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