AI Investing: Still in the Early Innings — Why ETFs Are the Smarter Play

 

The AI Boom: Stock Market’s Hottest Trend

One of the most talked-about themes in today’s stock market is undoubtedly artificial intelligence (AI). In both U.S. and Korean equity markets, shares of leading AI companies such as NVIDIA and Broadcom continue to hit record highs, capturing the attention of global investors.

Market strategists often compare this moment to a baseball game: “If a baseball game has nine innings, we haven’t even finished the third inning yet.” In other words, the AI revolution is still in its early phase. That means investors who want to grow their wealth for the long term cannot afford to ignore AI-related opportunities.

The challenge, however, lies in the risks of chasing a handful of high-flying individual stocks. Many of these names are already considered overvalued, and betting everything on a single company leaves portfolios vulnerable to volatility. That’s why analysts are urging investors to consider a more balanced approach: diversification through AI-themed exchange-traded funds (ETFs).

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Why AI ETFs Deserve Attention

ETFs allow investors to gain exposure to a wide basket of stocks within a specific index or theme. Instead of trying to time the market with individual trades, an ETF provides instant diversification, reducing company-specific risk.

In the case of AI, ETFs are particularly appealing because they capture not only the “headline” names like NVIDIA or Broadcom but also the broader ecosystem of semiconductor and technology companies that benefit from AI adoption.

What makes them even more attractive is the ability to hold these ETFs in tax-advantaged accounts such as retirement savings plans or pension funds, allowing investors to enjoy potential growth while also minimizing tax burdens.

Among the AI ETFs launched recently, two products stand out:

• ACE NVIDIA Value Chain Active (NVIDIA Value Chain ETF)

• KoAct Broadcom Value Chain Active (Broadcom Value Chain ETF)

Both are “active” ETFs, meaning portfolio managers actively adjust holdings and weights rather than passively tracking an index. This strategy aims to generate returns that outperform the benchmark AI semiconductor index.

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NVIDIA Value Chain ETF: A Diversified Heavyweight

Launched in June 2024, the NVIDIA Value Chain ETF quickly gained traction, reaching a market capitalization of 124.6 billion KRW. It currently holds 33 companies, with NVIDIA (19.9%) and Broadcom (16.8%) forming the two largest positions.

Other notable holdings include ASML from the Netherlands, and U.S. semiconductor giants like AMD and Micron. This broad exposure makes the ETF well diversified across the global semiconductor supply chain.

However, there is one notable risk: the fund allocates about 7.1% to the leveraged ETF TSMX, which tracks TSMC at twice the daily return. Leveraged products can boost short-term gains but tend to underperform in the long run due to compounding effects. Moreover, including leveraged positions can increase the overall expense ratio, raising costs for investors.

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Broadcom Value Chain ETF: A Concentrated Bet

The Broadcom Value Chain ETF, launched in May 2025, is a newer product with a smaller market cap. Its portfolio is more concentrated, holding just 25 companies.

Broadcom accounts for 25.3% of the fund — a significantly higher allocation than in the NVIDIA Value Chain ETF — while NVIDIA represents about 14%. All holdings above 4% are AI-related companies, and notably, this ETF does not include leveraged products.

This concentration has helped the fund deliver strong performance in the short term, but it also raises risk. If Broadcom stumbles, the ETF could suffer disproportionately. Since Broadcom is a key supplier of ASIC chips for Big Tech companies, investors need to keep a close eye on AI spending trends among major tech firms.

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Key Takeaways for Investors

1. We’re Still Early in the AI Game
   The AI industry is just beginning to scale. Despite volatility, the long-term growth outlook remains compelling.

2. Diversification Reduces Risk
   Instead of chasing individual names, ETFs provide a balanced way to participate in the AI theme while minimizing company-specific risks.

3. Watch Out for Leverage
   Leveraged positions may look attractive in the short term but often erode returns over time. Always check whether your ETF includes them.

4. Follow Big Tech’s AI Spending
   Since companies like Broadcom are tied directly to Big Tech demand, their performance — and therefore their ETFs — depends heavily on the pace of AI investment from global tech giants.

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Final Thoughts: The Third Inning Has Just Begun

The AI era is like a baseball game still in its early innings. The future holds enormous potential, and while no one can predict the exact path of growth, it’s clear that AI stocks and ETFs will continue to play a central role in shaping market returns.

For investors, this could be the right time to step onto the AI field. Rather than risking it all on one stock, a diversified ETF strategy offers exposure to the winners of tomorrow — while also managing risk today. Holding these ETFs in tax-advantaged accounts can further boost long-term wealth by reducing tax drag.

In short: Don’t let FOMO drive reckless bets. Choose ETFs to capture the AI opportunity wisely.