Sylvia Jablonski, Defiance ETFs’ chief investment officer (CIO), recently sat down with TipRanks’ Julie Gillespie for an exclusive interview to discuss why the company’s Defiance AI & Power Infrastructure ETF (AIPO) is generating a lot of buzz among investors. In the interview, she detailed the reason AIPO was established, what makes it unique, and how it is structured as a thematic ETF. She also explained why the AI boom is only just beginning, the risks of investing in AI, and what lies ahead for the fund.
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Trade LITE with leverageAIPO Plugs Investors into Big Tech’s AI Engine
Artificial intelligence has emerged as the cornerstone of the modern economy, with expansive use cases, including cloud services, data mining and transfer, and quantum and supercomputing. Behind the Big Tech AI boom are power and physical infrastructure companies that form the backbone of this transformation and are the engine driving it forward.
It is these companies that AIPO seeks to provide investors with exposure to. This is even as AI’s total energy use is expected to double this year, marking an expansive growth potential for the companies working behind the doors to meet this soaring need for electricity.
“When you start thinking about what actually is behind AI and will allow AI to grow, it’s really a lot of these energy, semiconductor, and photonics companies, and so we really quickly came to market with the first-mover advantage in AI and infrastructure ETFs, and that’s what AIPO represents,” Jablonski explained.
AIPO’s Unique Thematic ETF Approach
Already, AIPO’s bet is paying off. The exchange-traded fund, which was launched in July last year, is now nearing $600 million in assets under management. The fund’s shares have also jumped roughly 63% since launch, with 50% of the rise since the beginning of January.
Showing just how impactful the fund has been, it won the Best New Thematic ETF at the ETF.com Awards, beating out about 750 new funds to clinch the top spot.
Jablonski explained that AIPO operates as a thematic ETF by pulling together a basket of stocks comprising companies with disruptive technologies that are at the forefront of AI innovation. This removes guesswork and confusion from investors’ decision-making process.
“Investors don’t have to try to pick the winner,” Jablonski noted. “Like, is the winner Vertiv (VRT)? Is it Quanta (PWR)? Is it Coherent (COHR)? Is it Lumentum (LITE)? It’s probably all of them, right? They’re all going to participate in this trade. And so, what we do is we craft this basket, which gives you the precise access to this niche theme.”
This approach makes AIPO stand out from the crowd. “AIPO is different from other ETFs,” the Defiance CIO pointed out. “You are not going to find an ETF out there that looks exactly like this. A lot of them are either very semiconductor-heavy or just pure energy companies.”
The fund’s top holdings include:
- Quanta Services (PWR), an electric, renewable, and oil-and-gas infrastructure engineering and construction company
- Vertiv Holdings (VRT), a cooling system and power distribution infrastructure firm
- GE Vernova (GEV), a power generation and electrification infrastructure company
AIPO Offers a Vehicle to Get in Early on AI
While tech leaders such as Nvidia (NVDA), Microsoft (MSFT), and Alphabet (GOOGL) have experienced massive growth fueled by the boom in AI, Defiance believes that the AI disruption is not yet fully priced into the market. This is evident in growing data center demand, continued grid modernization, and hyperscaler deals.
“AI is in its infancy, and so, as it scales and grows into the trillions that we’re expecting to see in terms of total addressable market over the next five to 10 years, you’re going to see bottlenecks and the need for increased infrastructure, energy, and natural resources,” Jablonski explained.
Managing AI Risk Through Portfolio Diversification
However, AI is a high-beta play, meaning that it moves more strongly than the market, either up or down, Jablonski noted. This makes betting on just one company a risky approach. That’s where AIPO comes in, as it helps investors to diversify their portfolios and exposure.
Indeed, investors continue to validate Defiance’s strategy, with AIPO approaching $600 million in AUM. More importantly, investor interest in AIPO remains elevated, underscoring sustained demand for the fund.