Thematic AI ETFs with Active and Passive Management

I'm going to talk a little bit about thematic ETFs and how important it is when you're looking at very concentrated areas of the market. Being able to pick winners and losers is important. It's why we're seeing such strong outperformance from CHAT over the other three.

I think whenever you're doing something that's really thematic, it is important to have active management, especially when it's in a particular area like this because missing the top performer, as Dave pointed out, Nvidia, Palantir, can substantially change the results. Having that active management, that really close eye on the portfolio, having the ability to make changes more frequently and to be more nimble, I think is advantageous whenever you're talking about thematic ETFs.

I think it is notable that CHAT is the only one that had large positions in Palantir and Nvidia, and we can say what we want of following the crowd momentum, whatever, but those stocks have been the biggest winners in the space. When you look at the winners in AI, it is actually these larger cap names. Now to Dave's point about volatility and how things have done over the last five years, I think that's all really valid.

You're not going to invest in a thematic ETF unless you have a strong conviction in this particular theme. But I will note that the theme of AI has only recently really picked up steam. Nvidia's been a great stock for five years, but it's only been in the past two and a half where the stock has really taken off. That is because the trends in AI have become more ingrained in the revenue and the future tailwinds of these companies.

More and more we're seeing companies kind of focus more on their AI opportunities. Marvel Technology is a perfect example. Company that was normally like a cloud networking, 5G kind of name has completely transformed its business because the vast majority of its demands coming from AI related opportunities, and so they have kind of sold off a lot of their ancillary businesses to focus more on AI. I think we're going to see more of that.

So in the next five years, I think this is a theme that you would want to be invested in and a concentrated way. And so for that reason, I think the active management and the concentrated nature of CHAT makes it stand out for me among the battle category ETFs.