Dan Ives Just Unveiled His AI ETF—Does It Live Up to the Hype?

Key Points

• Dan Ives of Wedbush Securities handpicked 30 high-conviction stocks for the new AI-focused ETF.
• The fund heavily features major players like the Magnificent Seven, Broadcom, and Taiwan Semiconductor, and excludes some key infrastructure firms like ASML.
• With a 0.75% expense ratio, IVES charges more than index funds but offers dynamic management and real-time portfolio shifts based on Dan Ives’s research insights.

A new AI-focused ETF just hit the market with backing from one of the most well-known tech analysts on Wall Street: Dan Ives.

Ives is the Managing Director, Global Head of Technology Research at Wedbush Securities. He is a frequent guest on financial media outlets like CNBC and Bloomberg, and is known for his bullish takes on AI and colorful attire. Now, Wedbush and Ives have launched the Dan IVES Wedbush AI Revolution ETF NYSEARCA: IVES. Given his prominence in the proverbial investing town square, this new offering is worth examination. What, if anything, sets its holdings apart in an increasingly crowded AI landscape?

Heavy Hitters Take Center Stage, and Rightfully So

Many of the usual suspects, including all of the Magnificent Seven stocks, are at or near the top of IVES' holdings list.

Each of the Manificent Seven stocks has a weight of 4% or more, and in total account for just under 33% of the portfolio. This is very similar to the S&P 500 Index, where these seven names make up around 32% of the overall weight. Markets see all these names as leaders in AI, although their implementation strategies differ significantly. Broadcom’s NASDAQ: AVGO nearly 5% weighting also makes sense, considering its leading role in AI chip development.

Importantly, the IVES ETF includes one AI company that investors won’t find in the S&P 500: Taiwan Semiconductor Manufacturing NYSE: TSM. Although the stock trades on the New York Stock Exchange, it is still not a U.S. company, making it ineligible for inclusion in the S&P 500. The approximately 4.7% weighting of TSMC in the IVES ETF gives investors meaningful exposure to the most dominant player in advanced chip fabrication.

Outside of chip designers and hyperscalers, the IVES portfolio is mainly centered around software companies using AI. This includes the likes of Palantir Technologies NASDAQ: PLTR and Salesforce NYSE: CRM.

Important Exclusions and Second-Order AI Plays

Despite their importance in AI hardware development, chip manufacturing equipment giants like ASML NASDAQ: ASML and electronic design automation (EDA) companies are notably excluded from the fund's holdings. This suggests Ives is taking a more streamlined, conviction-led approach rather than aiming for broad sector coverage.

Interestingly, several cybersecurity pure plays like Palo Alto Networks NASDAQ: PANW make the list. Overall, these stocks account for approximately 8.3% of the portfolio.

The fund also provides exposure to some second-order and smaller AI-driven firms that S&P 500 index funds do not include, such as Oklo NYSE: OKLO and Pegasystems NASDAQ: PEGA. Oklo operates in the small modular reactor (SMR) field, and if its technology proves feasible, it may see strong demand due to AI. Hyperscalers want to use nuclear energy to power their data centers, as it is reliable and renewable. Pegasystems is particularly interesting due to its GenAI Blueprint tool, which helps companies deploy AI to reengineer or optimize internal processes in a user-friendly way.

Active Management Comes at a Price

When it comes to funds, paying attention to fees is paramount. IVES has a moderately high expense ratio of 0.75%, but for an actively managed fund, this is well within the reasonable range. For comparison, the Global X Artificial Intelligence & Technology ETF NASDAQ: AIQ charges 0.68%, and S&P 500 trackers can charge as little as 0.05%.

Essentially, investors are paying for Ives’s real-time research and agility. The portfolio will evolve as AI trends shift, a potential advantage over static index funds.

Is Investing in IVES Worth It?

It is important to consider that IVES does not offer a comprehensive allocation across all parts of the AI ecosystem. However, doing so would be nearly impossible, given the relatively concentrated list of just 30 holdings. Rather, the fund represents Ives's highest conviction bets that will benefit from AI.

As with any AI-focused ETF, IVES will be more volatile than the general market. However, that volatility could pay off in the long run. Ives and his team will keep a close eye on the holdings, changing them if a big opportunity arises. This is one of the main benefits investors are paying for.

Overall, as a way to gain targeted AI exposure with Wall Street management, IVES is a formidable option. Still, there is certainly a chance the low-cost Technology Select Sector SPDR Fund NYSEARCA: XLK will provide similar or better performance going forward without the elevated fees.