Artificial intelligence has become one of the biggest investment stories in the market, driving a surge of assets into thematic exchange-traded funds that allow retail investors to bet on major technology trends. But experts warn that these funds can fall just as quickly as they rise. This is a simple but important point for investors to remember, as tech stocks look more vulnerable and have led the market decline in recent days. The Nasdaq continues to decline below its 50-day moving average for the first time since April’s decline, and on Thursday it posted its third consecutive session of declines.
“At ETF Action, we have close to 400 ETFs that we categorize into thematic categories,” Mike Akins, founding partner of research firm ETF Action, told CNBC’s “ETF Edge” on Monday. “The top performers are up more than 150% year-to-date…and some are down 10%,” he said.
Investors are drawn to thematic ETFs that cover trends from AI to quantum computing, clean energy and defense technology, but often overlook risks such as portfolio volatility. Thematic ETFs focus on a specific sector or technology rather than just tracking a broad index, which can lead to big gains when the theme is favorable, but can also dampen momentum.
ETF Action divides the thematic ETF universe into 12 main categories with many subgroups. In the area of disruptive technologies alone, including artificial intelligence, flows this year have been huge. “AI disruptive technologies have seen nearly $20 billion in capital flow since the beginning of the year,” Akins said. About $15 billion of that money includes “AI” in the ETF name, he said.
The surge has helped boost funds such as the Global The company’s top holdings include Advanced Micro Devices, Alphabet, Samsung, Tesla, and Alibaba. Another example of Global X is the Robotics & Artificial Intelligence ETF (BOTZ), which has approximately $3 billion in assets under management. Major holdings include Nvidia, ABB, Fanuc, Intuitive Surgical, and Keyence.
Thematic ETFs require more research than traditional funds. Case in point: Of the 18 ETFs that ETF Action classifies as AI-focused, there’s been a 60% dispersion in performance this year, Akins said.
“Every time a new ETF is introduced to the market, there is significant tracking error just by investing in the market,” he said.
According to Reuters, nearly 800 ETFs were created in the first nine months of 2025, breaking the previous ETF creation record set last year. There are currently more ETFs (more than 4,300 U.S.-listed ETFs) than individual stocks trading in the U.S., according to Morningstar data.
Akins said the growth in the ETF market has been “overwhelmingly positive” for the investor experience, but added that increased opportunity also means increased risk.
Some of the themes that drove the early wave of thematic investing may lose momentum as standalone investment stories, even though the trends remain fundamental to the technology sector and markets, Akins said. For example, ETFs built around cloud computing and next-generation connectivity have seen billions of dollars in outflows over the past few years as their top holdings mature and become part of broader stock indexes that investors already own. However, he added that it is difficult to pinpoint the timeline of each trend’s momentum.
“I think every theme is unique to itself, so some themes are going to last longer than others,” Akins said. “That’s part of the story about this space…The idea that I would invest in this is definitely there because I believe it’s going to play out over the next three to seven years.”
Despite recent turmoil in the stock market, particularly in tech stocks, it’s important to note that the Nasdaq stock price is down less than 5% from its all-time high and is up nearly 250% from its pandemic lows. Akins said thematic investing is valuable for investors who know what they’re buying and can tolerate short-term volatility.
Capturing moments of opportunity in the market is also key to thematic strategy. “Themes run very fast, so you need to take advantage of that,” Akins says. If significant gains are made in a short period of time, investors may consider taking profits. “Although the assignment to the theme is necessary, you can also remove some from the top,” he added.
Top 10 Disruptive Tech ETFs
First Trust Nasdaq Cybersecurity (CIBR)
Assets: $11.5 billion
Expense ratio: 0.59%
Year-to-date performance: 20%
iShares AI Innovation and Technology (BAI)
Assets: $7.6 billion
Expense ratio: 0.68%
Year-to-date performance: 30.5%
Global X Artificial Intelligence & Technology ETF (AIQ)
Assets: $7.2 billion
Expense ratio: 0.68%
Year-to-date performance: 33.6%
Round Hill Magnificent Seven (MAGS)
Assets: $4 billion
Expense ratio: 0.29%
Year-to-date performance: 22.2%
First Trust Cloud Computing (SKYY)
Assets: $3.3 billion
Expense ratio: 0.60%
Year-to-date performance: 14.4%
Defiance Quantum ETF (QTUM)
Assets: $3.2 billion
Expense ratio: 0.40%
Year-to-date performance: 37%
JP Morgan US Tech Leaders (JTEK)
Assets: $3.1 billion
Expense ratio: 0.65%
Year-to-date performance: 22.8%
Strengthening Cyber Security (HACK)
Assets: $2.3 billion
Expense ratio: 0.60%
Year-to-date performance: 15.5%
ARK Next Generation Internet (ARKW)
Assets: $2.2 billion
Expense ratio: 0.75%
Year-to-date performance: 51.2%
Roundhill Generative AI & Technology (CHAT)
Assets: $1.1 billion
Expense ratio: 0.75%
Year-to-date performance: 55%
Source: ETFAction.com
