While the smaller ROBO Global Robotics & Automation Index ETF experienced withdrawals of $14.3 million, the larger Global X Robotics & Artificial Intelligence ETF saw net inflows of $1.8 million in September following significant outflows in the previous month.
However, according to Lipper data, both funds experienced their greatest monthly net inflows of 2023 in June, gaining $265.5 million and $29.74 million, respectively.
According to Aniket Ullal, head of ETF research and analytics at CFRA Research, with the publication of Chat GPT-4, AI and robotics-focused ETFs had a great start to 2023, bringing in more over $1.9 billion throughout the first three quarters of the year.
But in recent weeks, AI stocks have struggled alongside broader markets as investors’ appetite for risk has been dampened by Treasury yields that are lingering around 16-year highs.
According to Ullal, “the inflows slowed in September as a result of the market’s perception that interest rates may now be higher for an extended period of time, which would affect tech firms with cash flows further in the future.”
As the initial excitement surrounding AI fades, retail investor flows into the field have also decreased. According to Vanda Research, net monthly retail flows into stocks with AI exposure were $1.96 billion in September, the lowest amount since April.
Investors reported that the soaring stocks were also suffering some profit-taking following their strong advance this year.
The performance of the Global X fund has increased by 21% so far this year, helped by a rapid increase in the megacap chipmaker Nvidia, whose price has increased by more than 200% so far this year.
Regarding the sector’s long-term prospects, investors remained upbeat.
According to Mark Haefele, chief investment officer at UBS Global Wealth Management, the recent slump offered a favourable chance to increase exposure to AI pioneers.
In particular, if large size tech firms like Nvidia owned in AI-themed tech ETFs continue to exhibit good earnings growth, CFRA’s Ullal said, “it is possible that this negative sentiment could reverse again in Q4.”