MW Why ETF investors are shaking off tech-stock turbulence and AI bubble fears
By Christine Idzelis
Tech ETF flows seem 'a little bit impervious' amid stock-market volatility, strategist says
ETF investors appear to be taking AI bubble fears in stride.
Investors in exchange-traded funds are demonstrating steadfast optimism about technology and artificial-intelligence-related stocks, sticking with tech through a turbulent November.
Tech is a more secular investment allocation that's "a little bit impervious" to near-term price performance, with U.S.-listed equity ETFs targeting that sector seeing inflows last month, said Matthew Bartolini, global head of research strategists at State Street Investment Management, in a phone interview. That signals enduring confidence surrounding the AI-related trade, with ETFs focused on robotics and AI leading thematic inflows in November even as tech stocks struggled, he noted.
December is off to an upbeat start for the State Street Technology Select Sector SPDR ETF XLK, which tracks an index of tech stocks in the S&P 500 SPX. The fund was up more than 1% this month based on Wednesday afternoon trading, faring better than the S&P 500 to start December as it extended its outperformance in 2025.
AI-focused ETFs, such as BlackRock's iShares A.I. Innovation and Tech Active ETF BAI and the Global X Artificial Intelligence & Technology ETF AIQ, have surged so far this year even after big drops last month.
While the AI buildout has given way to fears over stretched valuations in the stock market, investors also view generative AI as a powerful technology that will transform the global economy. In its 2026 outlook report, BlackRock described AI as the "dominant megaforce" shaping structural transformation, helping to fuel record highs in U.S. stocks this year.
"The AI buildout is dominated by a handful of companies whose spending is so large that it has a macro impact," the asset-management giant said. "We stay overweight U.S. stocks and the AI theme, supported by robust earnings expectations," BlackRock wrote, adding: "Capex may pay off overall, even if not for individual companies."
ETF investors are 'not running away'
Investors poured $1.3 billion into technology ETFs last month, even as the stock-market sector slumped, a note from State Street's Bartolini shows.
"They're not running away from a brief sign of turbulence that we saw," even if the pace of inflows into tech-sector ETFs in November fell a bit below their monthly average this year, Bartolini said. Tech inflows picked up in the second half of November partly on increased optimism that the Federal Reserve may lower its benchmark interest this month, he said.
Last month, technology received the second-largest sector-ETF inflows after healthcare, a traditionally defensive area of the market, Bartolini found. But tech easily dominates year-to-date sector inflows, at $14.6 billion through November, according to his research.
"This is still very much the early stage" of both investment in artificial intelligence and "AI investment theses being put in place in the market," he said.
As investors added about $1.7 billion to thematic ETFs in November, robotics and AI stood out as the most popular within the category last month and so far this year, according to his research. ETFs focused on robotics and AI received $1 billion from investors last month, bringing their 2025 inflows to about $14.7 billion.
The iShares A.I. Innovation and Tech Active ETF, which actively invests in AI and tech stocks globally, surged 28% this year through Tuesday, even after tumbling 7.1% in November, according to FactSet Data. The fund's strong performance in 2025 trounces the S&P 500's 16.1% gain this year through Tuesday.
The fund is among BlackRock's fastest-growing ETFs, Jay Jacobs, the firm's U.S. head of equity ETFs, told MarketWatch.
Launched in October 2024, the iShares A.I. Innovation and Tech Active ETF, had around $8 billion in assets under management as recently as Tuesday, with its top five holdings at the time including Broadcom $(AVGO)$ Nvidia (NVDA), Microsoft $(MSFT)$, Snowflake (SNOW) and Facebook parent Meta Platforms (META).
Meanwhile, shares of the Global X Artificial Intelligence and Technology ETF - whose top holdings as of Tuesday were Google parent Alphabet $(GOOGL)$ $(GOOG)$, Samsung Electronics (KR:005930), Advanced Micro Devices $(AMD)$, Broadcom and Apple $(AAPL)$ - was up a massive 30.5% this year through that same date. The fund, launched in 2018, had about $7 billion in assets as of Tuesday.
ETFs are an increasingly popular way for investors to get exposure to financial markets across asset classes, with U.S.-listed exchange-traded funds raking in $1.25 trillion this year through November - already surpassing the annual record seen in 2024, according to State Street.
The booming ETF industry offers many ways to gain tech exposure, including the newly launched iShares Nasdaq Premium Income Active ETF. The fund, which began trading Wednesday under the ticker "BALQ," is designed to provide monthly income using an options-based strategy in addition to exposure to the Nasdaq-100 index NDX, said Jacobs.
The Nasdaq-100 has seen a big rally so far this year, staging a rebound from its November slide amid a bull market for U.S. stocks.
The Invesco QQQ Trust Series I QQQ, an ETF tracking the tech-heavy index, jumped 21.7% in 2025 through Tuesday. The ETF was up modestly Wednesday afternoon to advance 0.7% in December, according to FactSet data, at last check.
"Investors are shaking off any concerns of an AI bubble," said Matt Kaufman, global head of ETFs at Calamos Investments, in an interview. "They don't want to miss" the longer-term run in AI, and they're looking at various ways in the ETF industry to get tech-related exposure, he added.
-Christine Idzelis
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 03, 2025 15:12 ET (20:12 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
Comments