Artificial intelligence has become one of the dominant forces shaping exchange-traded fund (ETF) investing, with investors increasingly directing capital toward funds tied to AI technologies and the infrastructure supporting their expansion, according to a new report from J.P. Morgan Asset Management.
The firm’s latest Guide to ETFs identifies AI-focused investment products as one of the five largest thematic ETF categories by assets under management, indicating that enthusiasm for artificial intelligence continues to reshape portfolio allocation despite heightened volatility across technology stocks during the second quarter.
The findings suggest investors are looking beyond individual AI companies and instead using ETFs to gain diversified exposure to a rapidly evolving industry that spans semiconductor manufacturers, cloud computing providers, software developers, power infrastructure companies and data center operators.
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“Many [themes] are morphing towards AI and the ecosystem surrounding AI,” Jon Maier, J.P. Morgan Asset Management’s chief ETF strategist, said during CNBC’s ETF Edge.
According to Maier, AI investing is increasingly intersecting with other long-term investment themes, particularly infrastructure, reflecting the enormous physical buildout required to support next-generation AI systems.
“It’s all kind of feeding into the AI story … the applications, the energy [and] the AI models,” he said.
Recently, there has been a growing shift in how investors view artificial intelligence. Rather than focusing solely on software developers such as OpenAI or large technology companies, investors are now targeting the broader AI value chain, including companies supplying chips, networking equipment, electricity generation, cooling systems and data center infrastructure.
Analysts see the pattern as a reflection of the capital-intensive nature of AI development. Training and deploying frontier AI models requires massive investments in semiconductors, cloud infrastructure, specialized networking hardware and reliable energy supplies, creating investment opportunities across multiple industries.
That broader investment thesis has helped fuel demand for thematic ETFs that bundle exposure to companies positioned to benefit from AI adoption without requiring investors to select individual winners in an increasingly competitive market.
The report also points to a structural shift in how investors are accessing financial markets. J.P. Morgan found that overall inflows into mutual funds have slowed considerably in recent years while ETFs continue attracting growing amounts of investor capital.
“That’s only going to continue,” Maier said, noting that the firm’s research showed mutual funds have experienced net outflows over the past several years.
The migration reflects a long-running transformation in the asset management industry, where investors have favored ETFs for their lower costs, greater transparency, trading flexibility and tax efficiency. Unlike traditional mutual funds, ETFs generally allow investors to buy and sell shares throughout the trading day like individual stocks. They also tend to generate fewer taxable events because of their creation and redemption mechanism, making them particularly attractive to long-term investors.
Maier said the tax advantages have become an important factor driving ETF adoption among retail investors.
“They typically don’t pay a capital gain [tax],” he said.
By contrast, mutual fund investors can face taxable capital gains distributions even during periods when the value of their investments has declined.
“Imagine if you bought a mutual fund in 2022 and you’re down 20%, 30%, 40%, depending on what part of the market you bought, and you still got a capital gain of 6%. You’re not happy,” Maier said.
The continued shift from mutual funds to ETFs has become one of the defining trends in global asset management, with ETF assets reaching record levels as both institutional and retail investors increasingly use the products for long-term investing, tactical portfolio adjustments and thematic exposure.
AI has emerged as one of the strongest beneficiaries of that transition.
Investor demand for AI-related ETFs has accelerated alongside surging capital spending by major technology companies including Microsoft, Amazon, Alphabet and Meta, which are collectively investing hundreds of billions of dollars in AI infrastructure. Those investments have expanded the universe of publicly traded companies positioned to benefit from the AI boom, ranging from semiconductor manufacturers and cloud providers to utilities, construction firms and industrial equipment suppliers.
The broadening investment opportunity has encouraged ETF providers to launch increasingly specialized AI funds targeting segments such as generative AI, robotics, semiconductor design, data center infrastructure, cybersecurity and AI-enabled software.
At the same time, the report suggests investors are becoming more sophisticated in how they approach AI investing. Rather than concentrating solely on companies developing frontier AI models, many are seeking diversified exposure across the ecosystem that supports AI deployment, including computing hardware, energy generation and enterprise software.
That approach may also help reduce portfolio risk in an industry characterized by rapid technological change and intense competition.