WEBVTT - AI Mania Is Coming for ETFs 0:00:05.600 --> 0:00:06.320 Welcome trillions. 0:00:06.320 --> 0:00:11.680 I'm Joel Whatever and I'm Eric Belchunas. 0:00:12.800 --> 0:00:19.520 Eric, maybe you've noticed the media tech landscapes are obsessed 0:00:19.920 --> 0:00:24.000 with artificial intelligence right now you think, yeah, yeah, you 0:00:24.160 --> 0:00:26.080 used GPT yet. 0:00:26.160 --> 0:00:30.880 Indirectly, but I totally know about it. It's impressive, although 0:00:31.960 --> 0:00:34.720 you know, I'm still trying to make sense of it all. 0:00:35.040 --> 0:00:39.000 I will say that it does seem like every two 0:00:39.080 --> 0:00:43.640 years something just hits the zeitgeist with the Wall Street 0:00:43.720 --> 0:00:48.080 Hype Machine, blockchain, and then it was like ESG. I 0:00:48.120 --> 0:00:50.560 just feel like now AI is like front and center. 0:00:51.000 --> 0:00:53.920 This is the new new thing. Anything with that associated 0:00:53.920 --> 0:00:56.880 with it is going to have success. Is it a 0:00:56.880 --> 0:00:59.920 bubble maybe? Is it just something to satiate the neat 0:01:00.120 --> 0:01:02.080 marketers or is it truly the next one? Or is 0:01:02.080 --> 0:01:04.360 it truly the next big thing? I will say I 0:01:04.400 --> 0:01:07.880 was at the SEC's first ever Investment Division of Investment 0:01:07.920 --> 0:01:12.759 Management conference in DC two fridays ago. Gensler spoke at 0:01:12.800 --> 0:01:15.000 this conference and he said AI is going to be 0:01:15.000 --> 0:01:16.880 bigger than the Internet, and they're looking into how to 0:01:16.920 --> 0:01:19.480 regulate it and whatnot. So that was an eye opener 0:01:19.560 --> 0:01:22.880 because I do find sometimes you don't know at first 0:01:22.880 --> 0:01:26.760 whether something's just this huge hype marketing thing or it's 0:01:26.840 --> 0:01:31.160 really worthy of all that attention. I'm not sold totally, 0:01:31.240 --> 0:01:34.560 but certainly in the ETF world, there's a ton of 0:01:34.600 --> 0:01:37.679 attention that's coming about AI, and we're going to continue 0:01:37.720 --> 0:01:40.560 to see ETFs that have AI in the name doing 0:01:40.640 --> 0:01:42.600 a variety of things, and so we should cover it 0:01:42.640 --> 0:01:43.000 for sure. 0:01:43.280 --> 0:01:45.679 Yeah, and we didn't ready to talk about this for 0:01:45.720 --> 0:01:48.800 a second, but I think we've got two perfect guests 0:01:48.800 --> 0:01:50.320 to kind of walk us through it. One's going to 0:01:50.360 --> 0:01:53.080 be Rebecca Sen at Bloomberg Intelligence, who's been watching this 0:01:53.120 --> 0:01:56.240 space closely. And then we've got Dave masa chief strategy 0:01:56.280 --> 0:02:01.320 officer at round Hill Investments, which just launched an ETF 0:02:01.400 --> 0:02:09.720 called Chat this time on Trillions AI Mania. Dave, Rebecca, 0:02:09.840 --> 0:02:10.840 Welcome to Trillions. 0:02:11.080 --> 0:02:11.920 Thank you for having me. 0:02:12.200 --> 0:02:13.119 It's pleasure to be here. 0:02:13.560 --> 0:02:15.799 Rebecca. I want to start with you. You, like I said, 0:02:15.800 --> 0:02:20.040 you've been watching the space closely. There's there's two distinct 0:02:20.120 --> 0:02:21.920 ways that we can talk about this, so let's just 0:02:21.960 --> 0:02:24.079 be clear about that. How do you break it down? 0:02:24.720 --> 0:02:27.040 So if we look at all of the ETFs that 0:02:27.120 --> 0:02:31.520 haven't mention of AI Autonomous robotics, there's really two ways 0:02:31.560 --> 0:02:35.040 that we classified it. The first are ETFs that track 0:02:35.200 --> 0:02:39.640 AI companies, so that's the like of ourc roundhill ball 0:02:39.680 --> 0:02:41.960 there ETF that just launched that day we'll talk about. 0:02:42.080 --> 0:02:46.720 But then the second category are really ETFs that utilize AI. 0:02:47.120 --> 0:02:49.760 So these are ETFs that had an artificial intelligence that's 0:02:49.800 --> 0:02:52.160 telling them which stocks to buy and sell, when to 0:02:52.200 --> 0:02:56.079 buy and sell, and the likes of those would be fourth. 0:02:56.600 --> 0:03:00.320 In Korea, they have a core ETFs and they just 0:03:00.400 --> 0:03:03.400 launched one last week. But then the other one is 0:03:03.480 --> 0:03:08.880 also AI EQ, which is tracking the IBM supercomputer and 0:03:08.919 --> 0:03:12.440 they analyze thousands of data points all day long, twenty 0:03:12.520 --> 0:03:14.720 four to seven, and they say that they could do 0:03:14.760 --> 0:03:17.280 the work of a thousand research analysts. So there's really 0:03:17.320 --> 0:03:18.720 two categories that we found. 0:03:18.800 --> 0:03:22.680 So yeah, one is a thematic bet on the sector, right, 0:03:22.800 --> 0:03:25.600 and the other is AI is coming for all of 0:03:25.639 --> 0:03:27.639 our jobs and it's just going to take over in 0:03:27.720 --> 0:03:30.240 either mint money or drive it portfolios into the ground 0:03:30.639 --> 0:03:31.360 or somewhere between. 0:03:31.480 --> 0:03:35.000 Yeah, So let's just chew through the second version and 0:03:35.000 --> 0:03:37.520 then we'll get to Dave and the thematic play. The 0:03:37.560 --> 0:03:40.640 first version is AI powered ETF, So these are ETFs 0:03:40.640 --> 0:03:43.560 that use AI to invest. Now, I consider this just 0:03:43.640 --> 0:03:46.280 sort of like an evolution of smart beta smart beta 0:03:47.280 --> 0:03:51.560 because it's using algorithms and numbers and stats. It's crunching 0:03:51.600 --> 0:03:54.440 numbers to try to figure out a way to get alpha. 0:03:54.960 --> 0:03:57.880 That's smart beta is sort of what that is already, 0:03:58.440 --> 0:04:00.720 and there's been AI for a couple of years. It's 0:04:00.760 --> 0:04:03.200 not totally brand new. AIEQ, as Rebecca mentioned, was the 0:04:03.200 --> 0:04:06.839 one that was using IBM's Watson supercomputer. We recently looked 0:04:06.840 --> 0:04:09.520 at this one. The returns aren't great. It's lagging the 0:04:09.600 --> 0:04:12.360 S and P by quite a bit. I dug into why, 0:04:12.520 --> 0:04:15.360 and my conclusion was it's just trades too much. It's 0:04:15.400 --> 0:04:18.640 turnover is really high. It's going through stocks left and right. 0:04:18.720 --> 0:04:22.280 And this brings up the bigger problem with AI powered ETFs, 0:04:22.360 --> 0:04:27.400 which is you can't really solve the problem that regular 0:04:27.480 --> 0:04:30.719 managers have, which is costs impeding onto your return. So 0:04:31.320 --> 0:04:33.480 AI is gonna, in my opinion, have to figure out 0:04:33.480 --> 0:04:36.440 a way to maybe limit costs, limit trading, and limit 0:04:36.440 --> 0:04:39.640 the fee in order to have outperformance. So it's not 0:04:39.680 --> 0:04:43.279 like AI is like somehow discovered some holy grail. It's 0:04:43.279 --> 0:04:46.560 gonna face the same challenges that regular managers have and 0:04:46.560 --> 0:04:49.200 that smart beta has, both of which have learned to 0:04:49.200 --> 0:04:51.760 get cheap and limit turnover, and they've started to succeed 0:04:51.800 --> 0:04:54.120 because they've done that. So I think AI is early 0:04:54.160 --> 0:04:56.880 a lot of ETFs that have come out using AI 0:04:57.000 --> 0:05:00.000 or pretty high fees, the turnovers high. I think over 0:05:00.200 --> 0:05:03.000 time we might see one or two succeed if they 0:05:03.040 --> 0:05:05.960 can get some performance. But I'm a little more bearish 0:05:06.040 --> 0:05:09.000 on this side of the fence versus the thematic place. 0:05:09.160 --> 0:05:12.919 But Rebecca, how could this version of AI powered ETFs? 0:05:12.920 --> 0:05:15.039 How could this evolve more going forward? 0:05:15.640 --> 0:05:17.839 So I think going to air points. If we look 0:05:17.839 --> 0:05:20.920 at all of the AI powered etf from a performance standpoint, 0:05:20.960 --> 0:05:23.159 just looking at year to date, they actually LaGG the 0:05:23.200 --> 0:05:24.919 S and P five hundred. So looking at all of 0:05:24.960 --> 0:05:29.240 the ETFs, the AI powered ETF on average return three 0:05:29.400 --> 0:05:33.599 percent versus the ETFs that track AI companies return twenty percent. 0:05:34.040 --> 0:05:36.279 And they're also more expensive. So we found that on 0:05:36.320 --> 0:05:39.279 average they cost roughly seventy five basis points versus fifty 0:05:39.279 --> 0:05:42.880 basis points. And so in terms of where the growth is, 0:05:43.279 --> 0:05:46.040 I think with the AI powered ETF, you really need 0:05:46.080 --> 0:05:49.279 to find the right fund managers, as Eric was saying, 0:05:49.320 --> 0:05:50.800 a lot of this, A lot of them churt, so 0:05:50.839 --> 0:05:53.359 they have a higher training cost. And so even though 0:05:53.480 --> 0:05:55.640 a lot of these funds are powered by a supercomputer 0:05:55.720 --> 0:05:58.240 an AI, there's still someone tweaking the model. There's still 0:05:58.240 --> 0:06:01.520 someone tweaking the code. So I think that also impacts 0:06:01.560 --> 0:06:02.599 the performance of the fund. 0:06:02.920 --> 0:06:06.520 Okay, but the big phenomenon that we're seeing with the 0:06:06.600 --> 0:06:10.080 chat gbts of the world, generative AI is sort of 0:06:10.440 --> 0:06:14.080 what this is called, right, how much generative AI is 0:06:14.120 --> 0:06:17.400 even in these AI powered ETFs or is there yet 0:06:17.440 --> 0:06:22.000 another chapter to what this investment future could look like. 0:06:24.120 --> 0:06:27.200 I think this is where round Hill differentiates themselves with 0:06:27.240 --> 0:06:30.760 their new ETF, because they really are in that generative space. 0:06:31.080 --> 0:06:32.880 I think a lot of the ETFs that were launched 0:06:32.920 --> 0:06:36.839 previously are a little bit more traditional. They are quantitative based, 0:06:37.080 --> 0:06:39.440 but there is still someone in the background that's tweaking 0:06:39.440 --> 0:06:41.919 the model, that's changing it. And so I think in 0:06:42.000 --> 0:06:45.560 terms of where the future goes there as we adopt 0:06:45.720 --> 0:06:47.960 AI more and more. And I think chat GPT is 0:06:48.000 --> 0:06:52.400 a perfect example. Since chat gbt launched in November, they 0:06:52.440 --> 0:06:54.599 got more than one hundred million users in less than 0:06:54.640 --> 0:06:57.360 two months. So to put that in context, how many 0:06:57.760 --> 0:07:00.000 users do you think it took Uber to How long 0:07:00.000 --> 0:07:01.400 do you think it took Uber to get one hundred 0:07:01.400 --> 0:07:03.200 million users a year? 0:07:03.360 --> 0:07:06.880 Two years, three years, six years, six years, okay. 0:07:06.600 --> 0:07:10.680 Six years. So Instagram took two years and Spotify took 0:07:10.760 --> 0:07:14.000 four years, and so chat GBT got one hundred millionars 0:07:14.080 --> 0:07:16.920 million users in just two months. And so this really 0:07:16.960 --> 0:07:18.880 shows that not only is there a hype into this, 0:07:19.000 --> 0:07:21.880 but people are really invested and interested in this. And 0:07:21.960 --> 0:07:24.360 I think as you get more and more data in 0:07:24.440 --> 0:07:27.200 the AI space, that is only going to improve and grow. 0:07:27.400 --> 0:07:29.640 So I think if we look at specifically at ETFs, 0:07:29.640 --> 0:07:33.520 the ETFs that are powered by AI, they don't have 0:07:33.680 --> 0:07:36.480 enough data points and a lot of the technology when 0:07:36.520 --> 0:07:40.120 they first launched. I think AIEQ eric that launched a 0:07:40.200 --> 0:07:42.600 while ago, and looking at all of the robotics ETF, 0:07:42.640 --> 0:07:44.120 I think the first ETIF that launched was in two 0:07:44.120 --> 0:07:46.080 thousand and six, and so if we look at where 0:07:46.120 --> 0:07:48.320 technology is now versus in two thousand and six, it's 0:07:48.360 --> 0:07:51.600 improved a lot and it's only going to grow exponentially. 0:07:52.400 --> 0:07:56.240 That also the biggest challenge, and what nobody can get around, 0:07:56.280 --> 0:07:58.840 is that nobody really knows the future. It's just hard 0:07:58.880 --> 0:08:02.800 to predict the future and robot Ai Smart Beta Active Manager, 0:08:03.360 --> 0:08:05.920 it's just very difficult. My guess is one of these 0:08:05.920 --> 0:08:09.320 breaks out the pressro goes with like robots Win, that 0:08:09.360 --> 0:08:11.680 gets some money, but then it underperforms and maybe sees 0:08:11.720 --> 0:08:12.360 some outflows. 0:08:12.400 --> 0:08:14.560 And you've said you're saying that you've seen this movie before. 0:08:14.600 --> 0:08:15.520 I've seen this movie before. 0:08:15.560 --> 0:08:18.760 So now what Rebecca talked about Chat GPT and the 0:08:19.280 --> 0:08:22.160 frenzy to get on there, I think that speaks more 0:08:22.200 --> 0:08:24.040 to thematic play. In other words, let me buy some 0:08:24.080 --> 0:08:26.440 stocks that are going to benefit from this and let 0:08:26.520 --> 0:08:28.960 me get a piece of that action. That is where 0:08:29.080 --> 0:08:31.160 the thematic side comes from. Bringing Dave, now, I think 0:08:31.200 --> 0:08:35.680 that's a perfect intro. Dave, you've launched a new ETF 0:08:35.760 --> 0:08:39.960 called Chat. You're the chief strategy officer at Roundhill. What 0:08:40.120 --> 0:08:41.800 was the thought behind this and how long have you 0:08:41.840 --> 0:08:42.559 been working on it? 0:08:43.760 --> 0:08:45.480 Well, I think Rebecca hit the nail on the head, 0:08:45.480 --> 0:08:49.120 which was exciting for us when thinking about AI is 0:08:49.200 --> 0:08:51.720 not really just AI itself. This has been around for 0:08:51.760 --> 0:08:54.760 some time, but AI's been waiting for the killer app, 0:08:55.120 --> 0:08:58.200 and the killer app with Chat gibt and that made 0:08:58.280 --> 0:09:01.720 it so that because of its use and you biquitous nature. 0:09:01.800 --> 0:09:04.520 All you need is computer access or a smartphone and 0:09:04.559 --> 0:09:06.920 you can use Genera of AI in your daily life. 0:09:07.080 --> 0:09:09.400 That it opened up our eyes that this is not 0:09:09.679 --> 0:09:13.280 necessarily a theme or a fad that's happening ten fifteen 0:09:13.320 --> 0:09:16.640 years in the future. This can happen today and now 0:09:16.679 --> 0:09:22.040 we're seeing CEOs or as you noted, Gary Genzer, discussing AI, 0:09:22.200 --> 0:09:25.280 general AI and material ways because that's really where the 0:09:25.280 --> 0:09:28.240 productivity goes. I think it's exciting and everyone can be 0:09:28.240 --> 0:09:31.760 focused on humanoids and robots and thinking that's AI, and 0:09:31.800 --> 0:09:34.920 it is. But the ability to do so on sort 0:09:34.960 --> 0:09:37.640 of a micro level is what Genera of AI is doing, 0:09:38.080 --> 0:09:40.880 and that's really the idea behind creating an ETF just 0:09:40.960 --> 0:09:45.120 for that space, and chat provides exposure around thirty companies 0:09:45.480 --> 0:09:49.120 that are at the forefront of general AI, whether it's 0:09:49.160 --> 0:09:52.800 the picks and shovels of a company like Navidia, or 0:09:52.840 --> 0:09:55.720 companies that are exposed to it directly through ownership about 0:09:55.760 --> 0:09:59.199 OpenAI like Microsoft, or a handful of other names that 0:09:59.280 --> 0:10:02.080 folks may not is familiar with who are involved in 0:10:02.080 --> 0:10:02.520 the space. 0:10:03.000 --> 0:10:05.720 How quickly were you able to move on this. 0:10:06.840 --> 0:10:09.800 We launched the EUTF color I should say a couple 0:10:09.880 --> 0:10:12.600 of weeks ago, and so we moved really quickly, and 0:10:12.640 --> 0:10:15.000 this is an idea that we were using it. We 0:10:15.120 --> 0:10:19.520 started looking at chat EBT using it again either in 0:10:19.559 --> 0:10:23.559 our workflows or just to have fun and realize, say, 0:10:23.600 --> 0:10:26.600 there's something here. Can we do some research to identify 0:10:26.679 --> 0:10:29.480 other companies that may be exposed to it because it 0:10:29.520 --> 0:10:33.320 is a very nascent space, And it turns out once 0:10:33.360 --> 0:10:35.920 you do that peel back the onion, even just one layer, 0:10:36.320 --> 0:10:38.640 you can see that companies sort of have been poised 0:10:38.640 --> 0:10:41.560 to do this, and now that the intention is there, 0:10:41.880 --> 0:10:44.280 we're really beginning to see more and more folks latch 0:10:44.320 --> 0:10:44.719 onto it. 0:10:51.720 --> 0:10:54.760 So how do you figure out who's a real deal 0:10:55.320 --> 0:10:59.120 player here that has unique exposure? Like an Nvidia comes 0:10:59.160 --> 0:11:02.160 to mind, right, where you've got a chip maker who 0:11:02.280 --> 0:11:06.400 is all about the creating the chip four AI applications, 0:11:07.000 --> 0:11:10.040 and Microsoft, which is a backro of chat GPT right, 0:11:10.360 --> 0:11:12.640 But then like there's a kind of a falloff. I mean, 0:11:12.679 --> 0:11:14.840 I'll keep Google sort of in that camp or Alphabet 0:11:14.880 --> 0:11:17.160 in that camp, maybe because we know that they'll have 0:11:17.280 --> 0:11:20.320 something significant with bard. But after that, like, how do 0:11:20.360 --> 0:11:25.160 you figure out who's legit versus just generating more hype 0:11:25.240 --> 0:11:26.280 from the hype machine. 0:11:26.920 --> 0:11:28.959 Yeah, this is really important because I think what we're 0:11:29.000 --> 0:11:32.800 gonna find is, and we saw this with crypto and blockchain, 0:11:32.920 --> 0:11:35.960 there's got to be a handful of companies that perhaps 0:11:36.080 --> 0:11:39.200 changed their name we all know one from Long Island famously, 0:11:40.040 --> 0:11:42.760 or companies that are using it but not really exposed 0:11:42.800 --> 0:11:45.839 to it. Perhaps maybe some consumer names come to mind, 0:11:46.160 --> 0:11:49.360 a Wendy's or Pepsi. So what we're doing is two things, 0:11:49.600 --> 0:11:52.120 and I call it a kind of a talking to 0:11:52.240 --> 0:11:55.120 talk and walking the walk approach. You need both here 0:11:55.240 --> 0:11:58.319 to identify those companies that are truly exposed. So first 0:11:58.320 --> 0:12:01.880 and foremost we're transcript Score and so here we're looking 0:12:01.880 --> 0:12:06.320 at a proprietary keyword analysis of public documents, whether they 0:12:06.360 --> 0:12:11.320 are company filings, transcripts, presentations, or press releases to see 0:12:11.320 --> 0:12:15.400 if that company has references to various AI and related 0:12:15.600 --> 0:12:18.480 technology terms. And I you know, you'd imagine a company 0:12:18.520 --> 0:12:21.280 like Navidia jumps to the top of that list. But 0:12:21.280 --> 0:12:25.000 then importantly we also have what we call a sector score, 0:12:25.440 --> 0:12:29.280 and that's to do some real quantitative research to understand 0:12:29.840 --> 0:12:34.720 is a company actually spending or has direct revenue exposed 0:12:34.800 --> 0:12:38.680 to generate AI and the related technologies, and so companies 0:12:38.679 --> 0:12:41.720 that are doing more or have higher portion of revenue 0:12:41.760 --> 0:12:44.720 coming from that, or are spending on it for the 0:12:44.760 --> 0:12:47.559 future from a true R and D standpoint, are going 0:12:47.559 --> 0:12:50.400 to get higher score. So you pair those together, you know, 0:12:50.520 --> 0:12:54.440 subject to some standard market cap and liquidity requirements, you 0:12:54.520 --> 0:12:57.880 end up with a portfolio relatively concentrated in the grand 0:12:57.920 --> 0:13:01.520 scheme of things that has exposure to microcaps, small caps, 0:13:02.000 --> 0:13:04.080 mid caps, and of course some of the megacap names 0:13:04.080 --> 0:13:07.120 that are powering this forward. So investors can expect to 0:13:07.160 --> 0:13:10.280 see around twenty five to thirty securities going forward. It's 0:13:10.280 --> 0:13:13.520 a global portfolio, a lot of US exposure, but a 0:13:13.520 --> 0:13:16.240 lot of China exposure in the portfolio as well. And 0:13:16.280 --> 0:13:18.720 this is going to adapt through time, which is one 0:13:18.720 --> 0:13:20.720 of the reasons why we're excited that this is actually 0:13:20.760 --> 0:13:21.600 an active approach. 0:13:22.520 --> 0:13:23.679 How do you figure out the waitings? 0:13:25.200 --> 0:13:29.040 The waitings are really i'd say a derivation of both 0:13:29.080 --> 0:13:32.040 the transcript score and the sector score. So subject so 0:13:32.120 --> 0:13:35.160 companies that have are talking about it a lot and 0:13:35.200 --> 0:13:38.040 are actually spending on it, we're going to get higher rates. 0:13:38.559 --> 0:13:41.320 Hence the video being the top holding, and then and 0:13:41.360 --> 0:13:43.560 then so on. So if you look at our top 0:13:43.600 --> 0:13:47.560 ten holdings, uh, you know, it's names like Navidia, Microsoft, 0:13:47.720 --> 0:13:52.240 C three, AI, Alphabet and then AMD another semiconductor which 0:13:52.280 --> 0:13:55.760 is making some inroads with g GPUs and the chips needed. 0:13:55.520 --> 0:13:56.240 For general AI. 0:13:56.320 --> 0:13:56.800 It's interesting. 0:13:56.840 --> 0:13:59.600 I was at the inside ETFs conference and I looked 0:13:59.600 --> 0:14:01.400 at and I was on an AI panel, and I 0:14:01.440 --> 0:14:03.560 can't say I'm a total expert, but I looked at 0:14:03.559 --> 0:14:05.160 some of the ETFs and I brought shot up and 0:14:05.600 --> 0:14:08.720 my one critique of it. This is before Navidia's earnings. 0:14:09.200 --> 0:14:11.160 I looked at and I said, you know, I don't 0:14:11.200 --> 0:14:13.400 love theme ETFs that have big cap names at the 0:14:13.440 --> 0:14:16.840 top because I already own those in my low cost 0:14:16.920 --> 0:14:20.560 beta core. I don't need to be redundant. Then navidia 0:14:20.600 --> 0:14:23.760 earnings came out and I felt like maybe they were 0:14:23.840 --> 0:14:26.040 justified a little more because Navidia is the top holding, 0:14:26.040 --> 0:14:28.920 and they felt a lot of that juice. But typically 0:14:29.000 --> 0:14:32.360 I find DAVE in a fledgling area where the theme 0:14:32.440 --> 0:14:34.920 might not be totally ripe enough for a full ETF 0:14:35.360 --> 0:14:38.120 equal weighting or some kind of modified market cap waiting 0:14:38.560 --> 0:14:41.400 to give you more exposure to the small and mid 0:14:41.480 --> 0:14:45.600 cap space could be better because it helps differentiate the 0:14:45.600 --> 0:14:46.720 ETF more from BETA. 0:14:47.400 --> 0:14:48.040 Well, I think you. 0:14:48.040 --> 0:14:50.800 Raised a good point, and we could have this conversation 0:14:50.920 --> 0:14:54.960 about a variety of different ETF areas. It's whether it's 0:14:55.000 --> 0:14:58.680 factor based, smart, beta, ESG is a whole other can 0:14:58.680 --> 0:14:59.760 of worms and stomats. 0:14:59.800 --> 0:15:00.000 Right. 0:15:00.400 --> 0:15:02.200 The way I think about it for this space is 0:15:02.200 --> 0:15:06.480 it would be I think disingenuous not to have the 0:15:07.000 --> 0:15:11.000 exposure to a company like the Video or Microsoft or 0:15:11.000 --> 0:15:13.640 Alphabet in a material way in this portfolio, and because 0:15:13.640 --> 0:15:16.800 they're exposed to it, they get a higher weight. But 0:15:17.080 --> 0:15:19.160 you know, again in the top ten holding there's names 0:15:19.160 --> 0:15:23.280 like iFly Tech, since Time Group, even C three AI 0:15:24.280 --> 0:15:27.040 to some extent, a company like More you know, or 0:15:27.080 --> 0:15:30.280 a risk in networks that are not megacap growth. Right, 0:15:30.360 --> 0:15:33.680 So even among the thirty names, we have a wide 0:15:33.720 --> 0:15:37.960 representation of companies across the market cap spectrum. For US, 0:15:38.000 --> 0:15:40.680 it's really are you truly exposed to genera of AI 0:15:40.840 --> 0:15:42.880 or not? And that's what we're going to hang our 0:15:42.880 --> 0:15:46.200 hat on. And of course this market has been rewarding 0:15:46.200 --> 0:15:49.280 that that may not always be the case going forward. 0:15:49.560 --> 0:15:52.680 But if we can provide that exposure again in a 0:15:52.720 --> 0:15:56.360 concentrated way to companies truly exposed to jener of AI, 0:15:56.640 --> 0:15:57.800 then we feel like we're doing. 0:15:57.680 --> 0:15:58.320 Our job here. 0:16:00.320 --> 0:16:05.000 So I guess going off that Dave, there are seventy 0:16:05.120 --> 0:16:10.120 ETFs that has AI mentioned in their description and roughly 0:16:10.160 --> 0:16:14.000 sixteen billion in assets. We expect that by twenty thirty 0:16:14.000 --> 0:16:16.200 there's going to be one hundred and fifty ETFs with 0:16:16.280 --> 0:16:20.760 the mention of AI. Given how crazy and everyone's interest 0:16:20.800 --> 0:16:24.480 in this area with thirty five billion, what do you 0:16:24.520 --> 0:16:26.320 tell investors that say, you know, how do I pick 0:16:26.360 --> 0:16:28.720 which ETFs? A lot of them do have AI in 0:16:28.760 --> 0:16:31.000 their wording. There's a lot of hype in there. And 0:16:31.080 --> 0:16:33.440 to Eric's point, you know, just looking at NASDAQ one 0:16:33.520 --> 0:16:35.640 hundred and sm P five hundred, they have all the 0:16:35.680 --> 0:16:41.720 six names alphabet Navidia, Apple, Microsoft, and so what would 0:16:41.760 --> 0:16:43.080 you say to investors? 0:16:43.600 --> 0:16:45.920 Yeah, so it's funny. I did actually a research paper 0:16:45.920 --> 0:16:47.840 that was published at this point, probably ten years ago 0:16:47.840 --> 0:16:51.320 about givin ndtfs, and at the time it was crazy 0:16:51.360 --> 0:16:53.960 because it had first marked that there was one hundred 0:16:54.000 --> 0:16:57.080 divid endtfs. So now as you all know, there's hundreds more. 0:16:58.120 --> 0:17:00.480 And if you look at the performance dispersion of them. 0:17:00.800 --> 0:17:02.960 They were massive, right, and at the end of the day, 0:17:03.000 --> 0:17:04.720 a big difference was whether they give it in growth, 0:17:04.760 --> 0:17:06.840 which is more quality, or give it in yield there's 0:17:06.920 --> 0:17:09.480 more value. And I think the same can be said 0:17:09.520 --> 0:17:13.800 about the Mattos that when I in this market, it's 0:17:13.880 --> 0:17:19.320 very easy to put a buzzy name in an ETF 0:17:19.440 --> 0:17:22.320 name and see if that gets people's attention. I think, 0:17:22.840 --> 0:17:26.280 particularly post COVID experience and some of the selloff, investors 0:17:26.280 --> 0:17:29.920 have become more discriminating about the funds that they own 0:17:30.320 --> 0:17:32.440 and they understand that, you know, like our friend Todd 0:17:32.520 --> 0:17:35.840 Rosenblue says, you need to know what you own. And 0:17:36.280 --> 0:17:38.560 some people just want to buy either the largest or 0:17:38.600 --> 0:17:40.639 most well known, but it might not be the exposure 0:17:40.680 --> 0:17:43.760 you want. So I always advocate take a look at 0:17:44.320 --> 0:17:47.320 one what is the process to get the names in there? 0:17:47.359 --> 0:17:50.240 If it's an index process, take a quick look and 0:17:50.320 --> 0:17:53.159 understand the index methodology. You don't need to be an 0:17:53.200 --> 0:17:55.880 expert in any of this space, but can you understand 0:17:55.880 --> 0:17:57.640 what they're trying to do and then do the whole 0:17:57.680 --> 0:18:01.760 things generally reflect that? Right, So if we're in our 0:18:01.840 --> 0:18:05.239 case saying we're going to provide exposure to companies at 0:18:05.240 --> 0:18:08.720 the forefront of GENERATIVII, and a name like Navidia isn't 0:18:08.720 --> 0:18:11.840 a top holding, I'd probably question that. But also if 0:18:11.880 --> 0:18:14.280 there's names like sense Time Group, which is a leader 0:18:14.320 --> 0:18:20.600 in China in creating a computer focused AI marketplace, they 0:18:20.640 --> 0:18:23.760 have their own large language model, then that makes sense too. 0:18:23.880 --> 0:18:25.840 So this is going to be a space where I 0:18:25.840 --> 0:18:30.000 think there's there's, as noted, a ton of continued investor interest. 0:18:30.359 --> 0:18:33.040 There could be right or wrong reasons to buying any 0:18:33.080 --> 0:18:35.760 of these ETFs, but for us, when it comes to 0:18:35.840 --> 0:18:39.720 what is really focused on, generative AI chat stands alone. 0:18:39.800 --> 0:18:44.320 Okay, Dave, I'm curious. You've got this thematic option, You've 0:18:44.359 --> 0:18:47.280 laid out the case for it. At what point what 0:18:47.280 --> 0:18:50.520 would it take to put that engine that we talked 0:18:50.560 --> 0:18:55.840 about earlier in the show, the AI powered ETF engine, 0:18:56.040 --> 0:19:00.080 into the thematic thing, and then you have an AIM 0:19:00.119 --> 0:19:04.400 powered AI thematic ETF. What would that take? Yeah? 0:19:04.480 --> 0:19:09.280 So, look, look, we are huge believers in the transformation 0:19:09.560 --> 0:19:13.680 that jenerava I can bring both to everything from enterprise 0:19:13.760 --> 0:19:18.520 software where our director of research publisher report focused on 0:19:18.840 --> 0:19:21.600 an estimate of our tam of over one hundred and 0:19:21.640 --> 0:19:24.840 twenty billion in a ten years time, and also the 0:19:24.840 --> 0:19:30.600 consumer applications. But the idea that AI can be used 0:19:30.640 --> 0:19:34.240 to identify the company systematically at this point in time, 0:19:34.680 --> 0:19:38.359 I questioned that to me, I would agree at the 0:19:38.359 --> 0:19:41.040 intro to the show that this may just be the 0:19:41.080 --> 0:19:45.120 next evolution of quantitative investing. When I was a assistant 0:19:45.160 --> 0:19:48.240 quant portfolio manager in the mid two thousands, we had 0:19:49.119 --> 0:19:52.280 three components to our SoC selection model and we actually 0:19:52.280 --> 0:19:56.320 outperformed before the global financial crisis consistently, and one of 0:19:56.320 --> 0:19:59.960 those was priced book. It was so simple, but it worked, 0:20:00.080 --> 0:20:02.720 and then guess what happens? It gets arbitraged away. I 0:20:02.760 --> 0:20:06.840 think with AI, it's all dependent AI powered ets, AI 0:20:06.880 --> 0:20:11.240 powered investment processes. It all matters at this stage of 0:20:11.280 --> 0:20:15.240 development of is it being powered by humans appropriately? 0:20:15.640 --> 0:20:15.840 Now? 0:20:15.880 --> 0:20:19.479 Over time, as general of AI continues to improve, as 0:20:19.600 --> 0:20:23.359 large language models and other use cases begin to become 0:20:23.440 --> 0:20:25.840 more real time, we have to remember a lot of 0:20:25.840 --> 0:20:28.960 the genera of AI potential right now is still having 0:20:28.960 --> 0:20:31.639 that kind of backward looking learning. It's we are just 0:20:31.720 --> 0:20:35.520 at the cusp of it being applied across a wide 0:20:35.600 --> 0:20:39.320 range of industries. Then maybe I'd have more confidence in 0:20:39.359 --> 0:20:44.520 those particular approaches, But for now, our quantitative process, both 0:20:44.600 --> 0:20:48.520 sort of on the transcript side and then on the 0:20:48.880 --> 0:20:52.320 sector analysis side, gives me more confidence that will be 0:20:52.400 --> 0:20:55.080 identifying the names that will continue to be exposed to 0:20:55.119 --> 0:20:56.199 general of AI in the future. 0:20:56.359 --> 0:20:59.880 Is there any busy work that you can unleash AI 0:21:00.119 --> 0:21:01.840 on to improve your daily life? 0:21:01.880 --> 0:21:04.560 Dave, Uh, Well, one thing that you know, I think 0:21:04.600 --> 0:21:07.720 people are experimenting with, and we've heard some stories about 0:21:07.800 --> 0:21:10.720