Wedbush and Dan Ives Launch AI Revolution ETF

Tech analyst Dan Ives believes he has identified the most important companies driving artificial intelligence innovation today.

He and Wedbush Fund Advisors launched the firm’s inaugural ETF Wednesday — the Dan Ives Wedbush AI Revolution ETF (IVES). The fund, based on Ives’ proprietary research, targets companies leading the charge in robotics, semiconductor chips, retail products, and of course, AI. It’s the old California gold rush “picks and shovels” strategy. “AI isn’t just about the Mag 7,” Ives told Advisor Upside. “It’s the software, the consumer, the infrastructure, the cybersecurity players.” The fund had net assets of more than $26 million as of Wednesday, an expense ratio of 0.75%, and a net asset value of $25.35.

AI is likely going to be as monumental as the printing press or the internet, but do advisors have much enthusiasm for products that specifically target the sector?

AI-m to Please

There are plenty of AI-focused ETFs already, including Global X Artificial Intelligence & Technology ETF (AIQ), Defiance Quantum ETF (QTUM), and iShares Future AI & Tech ETF (ARTY) which collectively hold more than $5.5 billion in assets, according to data compiled by Morningstar Direct. As of the end of May, AI and robotics ETFs in the US alone have taken in nearly $1.3 billion. However, many of those funds also include holdings that aren’t AI-specific. For example, ARTY has plenty of exposure to multiple foreign currencies. 

IVES, on the other hand, is more limited:

• It’s made up of just 30 holdings, including all of the Mag 7.
• It also has a few names clients may not be aware of, like cybersecurity firm Zscaler, software-maker Pegasystems, and nuclear power company Oklo. 

“Investors miss a core part of the theme by not playing the second and third derivatives,” Ives said. Wedbush Funds CIO Cullen Rogers added that the fund allows large-cap leaders like Nvidia and Microsoft to carry influence without overpowering the portfolio, and it gives smaller names “a seat at the table.”

Making Waves? Though AI is being viewed as the fourth industrial revolution and has been responsible for major investor returns of late, AI ETFs — and thematics in general — are a tough sell for advisors, said Bryan Armour, director of ETF & passive strategies research at Morningstar. “Investors, and advisors alike, got burned by thematic ETFs in 2022, so they’ve failed to generate as much interest since then,” he told Advisor Upside.

Plus, clients already have significant exposure to AI companies when they invest in the S&P 500 or Nasdaq. “We have definitely seen how advisors have been putting some of the legacy AI thematic ETFs to work in client portfolios, but we’ve also seen advisors start to realize that most ‘AI’ ETFs are little more than the MAG 7 with high fees,” said Adam Patti, CEO of VistaShares.