Published on Vulcan Stock | Investment Research & Analysis
Summary
The artificial intelligence revolution is no longer a distant promise—it’s the defining investment theme of our time. As AI transforms industries from healthcare to manufacturing, a new generation of ETFs has emerged to capture this unprecedented opportunity. Leading the charge is the Dan Ives Wedbush AI Revolution ETF (IVES), launched in June 2025, which attempts to systematize one of Wall Street’s most prominent tech analysts’ stock picks into a disciplined investment vehicle.
Our comprehensive analysis reveals that while the AI ETF space is crowded with over 50 funds, each offers distinct exposure to different facets of the AI ecosystem. IVES stands out through its unique approach: combining expert curation with index discipline, capping individual positions at 4% to prevent mega-cap dominance while maintaining exposure to the full AI value chain.
Key findings:
- The AI ETF market has exploded from a handful of funds in 2016 to over 50 options today
- IVES offers a balanced approach with 30 holdings spanning AI software, semiconductors, and cloud infrastructure
- Performance differentiation is significant: top-performing AI ETFs have delivered 20%+ annualized returns over 3 years
- The sector remains in “inning 2” of a multi-decade transformation, with massive growth potential ahead
The AI Investment Thesis: Why We’re Still Early
Before diving into ETF specifics, it’s crucial to understand why AI represents such a compelling investment opportunity. The numbers tell a remarkable story.
Market Size & Growth Trajectory The global AI market, valued at approximately $428 billion in 2023, is projected to reach $2.02 trillion by 2030—a compound annual growth rate (CAGR) of 24.7%. This isn’t just another tech trend; it’s a fundamental shift in how businesses operate, comparable to the advent of the internet or the industrial revolution.
Enterprise Adoption Accelerating Recent surveys indicate that 80% of Fortune 500 companies are actively implementing AI solutions, up from just 20% in 2020. This adoption curve suggests we’re witnessing the transition from early adopters to mainstream implementation—a critical inflection point that historically drives exponential growth in enabling technologies.
The “Inning 2” Perspective Dan Ives, the tech analyst behind the IVES ETF, famously describes the AI revolution as being in “inning 2” of a nine-inning game. This perspective aligns with historical technology adoption cycles:
- Inning 1 (2020-2022): Foundation building, research breakthroughs, initial infrastructure investments
- Inning 2 (2023-2025): Early commercial deployment, platform establishment, infrastructure scaling
- Innings 3-4 (2025-2030): Mainstream adoption, application proliferation, productivity gains
- Innings 5-9 (2030+): Full integration, new business models, economic transformation
This framework suggests the biggest returns may still lie ahead, as AI transitions from a cost center to a profit driver across industries.
The ETF Landscape: A Comprehensive Analysis
The AI ETF market offers investors multiple ways to access this theme, each with distinct characteristics and risk profiles. Our analysis covers six major players:
1. IVES – The Expert-Curated Approach
Dan Ives Wedbush AI Revolution ETF (IVES)
- Launch Date: June 2025
- Holdings: 30 stocks
- Expense Ratio: 0.75%
- AUM: $300+ million (first month)
- Strategy: Passive tracking of Solactive Wedbush AI 30 Index
What Makes IVES Different: IVES represents a hybrid approach—neither purely passive nor actively managed. It tracks an index based on Dan Ives’ research, with key innovations:
- 4% Position Cap: No single stock can exceed 4% weight, preventing mega-cap dominance
- Quarterly Rebalancing: Regular updates to capture evolving AI landscape
- Full Value Chain Coverage: From semiconductor manufacturers to AI software developers
Top Holdings (% of fund):
- Microsoft (~5.7%)
- Nvidia (~5.5%)
- Broadcom (~5.0%)
- Tesla (~5.0%)
- Oracle (~4.0%)
The fund’s balanced approach means even tech giants like Microsoft and Nvidia—which dominate many AI portfolios—are capped at reasonable levels, creating room for mid-cap innovators.
2. BAI – The Active Management Play
BlackRock iShares A.I. Innovation and Technology ETF (BAI)
- Launch Date: October 2024
- Holdings: ~38 stocks
- Expense Ratio: 0.68% gross (0.55% net through 2026)
- AUM: ~$100 million
- Strategy: Active management by BlackRock’s tech team
BAI represents traditional active management applied to the AI theme. Portfolio managers Tony Kim and Reid Menge leverage BlackRock’s resources to make concentrated bets on AI leaders.
Performance Note: BAI’s early performance was challenged by timing (launching before a tech pullback), returning -12.6% from inception through March 2025. However, the fund recovered with the broader tech rebound, gaining 5.3% year-to-date by July 2025.
3. ARKQ – The High-Conviction Bet
ARK Autonomous Technology & Robotics ETF (ARKQ)
- Launch Date: September 2014
- Holdings: 35 stocks
- Expense Ratio: 0.75%
- AUM: ~$1.1 billion
- Strategy: Active management by Cathie Wood’s team
ARKQ takes the most aggressive approach, with concentrated positions in transformative technologies. Tesla comprises over 10% of the fund, reflecting ARK’s conviction in autonomous vehicles as an AI application.
Risk Profile: ARKQ’s high-conviction approach creates significant volatility. The fund’s 5-year standard deviation exceeds 30%, compared to ~22% for more diversified AI ETFs.
4. AIQ – The Comprehensive Solution
Global X Artificial Intelligence & Technology ETF (AIQ)
- Launch Date: May 2018
- Holdings: ~85 stocks
- Expense Ratio: 0.68%
- AUM: $3.75 billion
- Strategy: Passive tracking of Indxx AI & Big Data Index
AIQ offers the broadest exposure, with 85+ holdings across global AI companies. Its 3% position cap ensures diversification while capturing the full AI ecosystem.
Performance Highlight: AIQ has delivered strong returns with 23.6% over the past year and 29.0% annualized over three years through June 2025.
5. BOTZ – The Robotics Focus
Global X Robotics & Artificial Intelligence ETF (BOTZ)
- Launch Date: September 2016
- Holdings: ~50 stocks
- Expense Ratio: 0.68%
- AUM: $2.7 billion
- Strategy: Passive tracking of Indxx Global Robotics & AI Index
BOTZ emphasizes the physical side of AI—robotics, automation, and industrial applications. Its significant exposure to Japanese automation leaders (Fanuc, Keyence) provides geographic diversification.
6. ROBO – The Equal-Weight Pioneer
ROBO Global Robotics & Automation Index ETF (ROBO)
- Launch Date: October 2013
- Holdings: ~80 stocks
- Expense Ratio: 0.95%
- AUM: ~$1.0 billion
- Strategy: Modified equal-weight methodology
ROBO pioneered robotics investing with its unique equal-weight approach. The fund provides exposure to numerous smaller pure-play companies that might be overlooked in market-cap weighted funds.
Performance Analysis: What the Numbers Reveal
Historical Performance Comparison
| Fund | 1-Year Return | 3-Year Annualized | 5-Year Annualized | Volatility (3Y) |
|---|---|---|---|---|
| AIQ | +23.6% | +29.0% | +16.6% | 22.0% |
| BOTZ | +15.8% | +18.4% | +9.2% | 25.6% |
| ARKQ | +12.3% | +15.2% | +13.4% | 32.1% |
| ROBO | +11.7% | +14.8% | +8.9% | 24.2% |
Note: Performance data through June 2025. IVES and BAI excluded due to limited track record.
Key Performance Insights
- AIQ leads in recent performance with the strongest 1-year and 3-year returns, benefiting from its broad AI exposure during the recent rally.
- Volatility varies significantly across funds, with ARKQ showing the highest volatility due to its concentrated positions.
- Geographic diversification matters: BOTZ’s exposure to Japanese robotics companies has provided both benefits and challenges depending on currency movements.
Risk Analysis: Understanding the Downside
Thematic Risk
All AI ETFs face thematic risk—the possibility that AI adoption slows or fails to meet expectations. However, multiple indicators suggest this risk is diminishing:
- Corporate Investment: Global AI investment reached $200 billion in 2023, up 21% year-over-year
- Regulatory Clarity: Government frameworks are emerging, providing operational certainty
- Proven ROI: Early AI implementations show measurable productivity gains
Concentration Risk
While diversification varies across funds, most AI ETFs show some concentration in mega-cap tech stocks:
- High Concentration: ARKQ (top 5 holdings ~38% of fund)
- Moderate Concentration: IVES (top 5 holdings ~25% of fund)
- Lower Concentration: AIQ (top 10 holdings ~33% of fund)
Valuation Risk
AI stocks trade at premium valuations, with forward P/E ratios often exceeding 25x. However, growth expectations justify these multiples for many holdings.
The Case for IVES: Why This ETF Deserves Attention
Unique Positioning
IVES occupies a distinctive position in the AI ETF landscape. Unlike purely passive funds that may overweight the largest companies, or active funds that depend entirely on manager skill, IVES offers:
- Expert Curation: Dan Ives’ stock selection provides thematic focus beyond simple screening
- Balanced Exposure: The 4% cap prevents any single stock from dominating returns
- Systematic Approach: Quarterly rebalancing ensures the portfolio stays current with AI developments
Early Performance Indicators
Though launched recently, IVES showed promising early performance with a 3.4% gain from inception (June 3) through June 16, 2025, outperforming the Nasdaq-100’s 1% return in the same period.
Fee Justification
The 0.75% expense ratio reflects the fund’s specialized approach and quarterly rebalancing. While higher than broad market ETFs, it’s competitive within the AI ETF space and reasonable given the research and methodology involved.
Investment Implications: Building an AI Portfolio
Core vs. Satellite Approach
Investors can use AI ETFs as either core holdings or satellite positions:
Core Approach: Use a diversified AI ETF (AIQ or IVES) as a primary technology allocation Satellite Approach: Add specialized AI exposure (BOTZ for robotics, ARKQ for high-conviction plays) to complement broad market holdings
Geographic Considerations
Most AI ETFs have heavy U.S. exposure (70-80%), but some offer international diversification:
- BOTZ: ~50% non-U.S. exposure, heavy in Japanese robotics
- AIQ: ~20-30% non-U.S., including Chinese tech giants
- IVES: Primarily U.S.-focused but includes global leaders like TSMC
Risk Management
Given the volatility of AI stocks, consider:
- Position sizing: Limit AI ETF allocation to 5-15% of total portfolio
- Diversification: Combine different AI ETF approaches rather than concentrating in one
- Time horizon: Maintain a long-term perspective to weather short-term volatility
Looking Ahead: The Future of AI Investing
Secular Trends Supporting Growth
Several long-term trends support the AI investment thesis:
- Digital Transformation: Accelerated by pandemic, continuing across industries
- Labor Shortage: AI addresses skilled worker shortages in developed markets
- Productivity Imperative: Companies must adopt AI to remain competitive
- Infrastructure Buildout: Cloud, edge computing, and 5G enable AI applications
Potential Catalysts
Near-term catalysts that could accelerate AI adoption include:
- Regulatory clarity reducing implementation uncertainty
- Cost reductions in AI infrastructure making adoption more accessible
- Breakthrough applications demonstrating clear ROI in new industries
Risks to Monitor
Key risks that could impact AI ETF performance:
- Regulatory restrictions on AI development or deployment
- Competitive dynamics among AI platform providers
- Economic slowdown reducing corporate technology spending
- Valuation compression if growth expectations aren’t met
Conclusion: Positioning for the AI Future
The AI revolution represents one of the most significant investment opportunities of our generation. While the theme has attracted numerous ETF launches, each fund offers distinct exposure to different aspects of the AI ecosystem.
IVES emerges as a compelling option for investors seeking balanced AI exposure with expert curation and systematic risk management. Its unique approach—combining Dan Ives’ thematic expertise with index discipline—addresses many concerns about existing AI ETFs while maintaining broad exposure to the theme.
For investors building AI exposure, consider:
- Risk tolerance: High-volatility funds like ARKQ for aggressive growth, diversified options like AIQ for moderate risk
- Investment timeline: Long-term horizons can weather the inevitable volatility in emerging technologies
- Portfolio role: Whether AI serves as a core technology allocation or specialized satellite holding
The bottom line: We remain in the early innings of the AI revolution. Companies and investors positioning themselves now for this multi-decade transformation may be rewarded with outsized returns. The key is choosing the right vehicle for your investment objectives and risk profile.
As Dan Ives frequently notes, we’re witnessing a “$1 trillion+ AI spending cycle” that will reshape entire industries. The question isn’t whether AI will transform the economy—it’s whether investors will position themselves to benefit from this transformation.
For continued coverage of AI investing and thematic ETF analysis, visit vulcan-stock.com
Disclosure: This analysis is for informational purposes only and does not constitute investment advice. Past performance does not guarantee future results. Consider consulting with a financial advisor before making investment decisions.
Sources: ETF prospectuses, SEC filings, company reports, and industry analysis as of July 2025.
Vulcan Stock Research 
Leave a comment