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Equities

AI ETF Soars 60%, Outshines ARKK with Nvidia Bet

Spear Alpha ETF soars 60% in a year, capitalizing on AI with Nvidia as a key investment, amidst a competitive $630 billion active ETF market.

By Alex P. Chase

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4/27, 09:38 EDT
ARK Innovation ETF
NVIDIA Corporation
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Key Takeaway

  • Spear Alpha ETF (SPRX), focusing on AI, soared 60% past year, outperforming Ark Innovation ETF's 21% gain.
  • Strategic investment in Nvidia, now 11% of SPRX's portfolio, surged over 220%, highlighting Delevska's high-risk, high-return strategy.
  • Despite a competitive active ETF market, SPRX attracted $54 million in inflows in 2024, contrasting with ARKK’s $1.36 billion outflows.

AI Investment Trend

Ivana Delevska, a hedge fund veteran with experience at Citadel, Millennium, and Tiger Management, launched Spear Alpha ETF (SPRX) in August 2021, capitalizing early on the artificial intelligence (AI) investment trend. With $70 million in assets under management and approximately 26 holdings, Delevska's fund is heavily influenced by AI, impacting around 95% of its portfolio. Delevska's insight into industrial companies' investment in GPUs for AI allowed her to anticipate the AI boom ahead of others. Spear Alpha ETF has seen a significant performance increase, with a more than 60% gain in the past 12 months, outperforming the Ark Innovation ETF led by Cathie Wood, which gained just over 21% in the same period.

Nvidia's Strategic Role

A pivotal decision for Spear Alpha ETF was its investment in Nvidia, which has soared more than 220% in the past year. Initially bought in 2023 when Nvidia was "completely out of favor," it now constitutes almost 11% of SPRX's portfolio. Delevska views Nvidia as playing a more defensive role in her portfolio, expecting a 30% to 40% return over the next several years. This strategic investment in Nvidia underscores Delevska's approach to high-risk, high-return investments and her ability to identify and capitalize on emerging trends in technology.

Beyond AI: Diverse Themes

While AI remains the central theme of Spear Alpha ETF, the fund also explores other areas such as enterprise digitalization, space exploration, and decarbonization. However, Delevska emphasizes that Spear does not adopt a thematic approach but rather focuses on individual stock picks derived from the companies they cover. This strategy has led to Spear Alpha ETF attracting $54 million in inflows so far in 2024, contrasting with the $1.36 billion in outflows experienced by ARKK due to investor disappointment in its performance.

Active ETFs: A Competitive Landscape

The active ETF market has seen a surge in interest, with nearly $630 billion in US active ETFs. However, Morningstar Inc. warns that success in this rapidly growing field is not guaranteed, with 74% of active ETF assets controlled by the top 10 issuers. This concentration highlights the competitive nature of the active ETF landscape and the challenges new entrants face. Despite these challenges, asset managers continue to pursue active ETFs, adapting to market conditions and investor needs in a high-interest-rate environment.

Street Views

  • Ivana Delevska (Bullish on AI and Nvidia):

    "AI is obviously the biggest theme — there is no question — and it’s impacting basically 95% of our portfolio... So pretty much everything we were invested [in] right now is going to benefit from AI in one way or another." "When we were going into 2023, Nvidia was completely out of favor. So it was really like a way to play offense. It was a high risk investment, but also a high return investment."