ETF Edge: AI revolution, tech amid uncertainty and top ETF themes

AI ETF Landscape - Wedbush launched an AI-focused thematic ETF with the ticker IV, aiming to provide investors a way to invest in the AI theme [2][4] - The IV ETF is a concentrated portfolio of 30 dynamic names, rebalanced quarterly based on research into technologies driving AI and derivative beneficiaries [4][5] - Vetify indicates advisors are allocating roughly 5% to 10% of their portfolio for dedicated thematic investing, including AI [9] - Thematic ETFs, including AI-focused ones, can charge a higher premium than broad index-based products due to their specialized construction [13] Investment Strategy & Focus - The IV ETF's stock selection is based on identifying companies driving AI use cases and their derivative beneficiaries, with a current focus on software [6][8] - The fund's weighting is a combination of market views and conviction, with higher conviction names like Nvidia and Palantir positioned at the top [18][19] - Wedbush believes the market is underestimating the growth potential of the AI revolution and views geopolitical events as opportunities to buy tech stocks cheaper [29] - Software is considered a key area within AI, with potential for M&A and significant growth, while autonomous and robotics are viewed as the "golden goose" for AI [34][36] Market Dynamics & Considerations - Investors are becoming more accustomed to volatility, with increased interest in fixed income ETFs and broadly diversified ETFs like Vanguard 500 [23][24] - While tech was a safe haven in 2020, investors are now diversifying into defensive sectors like utilities and consumer staples [26][27] - It's important to avoid double-counting exposure when investing in thematic ETFs, ensuring they don't overlap with existing large-cap strategies [32] - Active management is gaining popularity in the ETF space, with 40% of flows in the first five months of the year going into active ETFs [37]