Amplify AI Powered Equity ETF

AIEQ

Valor de mercado US$ 113 mi

Amplify AI Powered Equity ETF remains a Hold due to persistent structural weaknesses in its AI-driven strategy. Despite a high turnover of 804%, AIEQ consistently delivers mediocre returns, trailing IVV as it cannot capture sufficient upside or minimize downside in volatile markets. AIEQ has underperformed the S&P 500 since my June article. Since the beginning of the year, it has trailed IVV and QQQM.

The hunt is on for the magic artificial-intelligence model that will enable investors to beat the stock market. For instance two researchers at Hong Kong University recently published a research paper claiming — in theory, anyway — they may have found one. (They will certainly not be the last.)

Amplify AI Powered Equity ETF tracks the AI Powered Equity Index, which selects constituents using the model that runs on the IBM Watson platform. Despite having a strategy powered by AI, AIEQ has not demonstrated consistent outperformance versus IVV and QQQ. It has trailed the former by close to 12% since January 2024. I remain neutral on AIEQ owing to its clearly disappointing performance, gargantuan turnover of 804%, and high expense ratio of 75 bps.

Artificial intelligence has become one of the defining investment themes of this cycle. Yes, we may be hearing about the AI pullback as a valuation reset.

The Amplify AI-Powered Equity ETF leverages IBM Watson and EquBot AI to pick stocks, aiming for faster, data-driven decisions than human managers. AIEQ has underperformed the S&P 500 since 2021, struggling in markets dominated by a few mega-cap tech stocks and rapid regime changes. The ETF's high turnover and management fees, plus reliance on historical data, limit its ability to consistently outperform broad passive indexes.

AI-focused ETFs are the most direct play, as they hold stocks in companies directly involved in developing or using AI. Broader-focused tech ETFs have a lot of AI exposure but also provide a hedge if you're worried about a bubble.

AIEQ's AI-driven strategy is intriguing but fails to deliver superior returns or lower risk compared to the S&P 500 ETF. AIEQ charges much higher fees, has poor liquidity, and delivers worse risk-adjusted and absolute returns than VOO, despite similar sector exposures. The ETF's heavy tech concentration only amplifies volatility without capturing the upside, making its risk profile unattractive for long-term investors.

New study shows AI stock-trading tools lagged a basic S&P 500 fund. AI-powered ETFs have similar results.

AIEQ offers an agile, AI-driven approach, analyzing vast data points for stock selection and sector allocation, but its portfolio closely mirrors the S&P 500. Despite its promise, AIEQ's sector and top holdings are not meaningfully different from SPY, limiting its potential for significant outperformance. AIEQ has shown some reactive ability to macro shifts, but historical performance lacks consistent alpha and sometimes diverges negatively from SPY.

AIEQ: An Example Of AI Failure