Bull vs. Bear is a weekly feature where the VettaFi writers’ room takes opposite sides to debate controversial stocks, strategies, or market ideas — with plenty of discussion of ETF ideas to play either angle. For this edition of Bull vs. Bear, Karrie Gordon and Nick Peters-Golden debate whether investors need pureplay AI exposure or if broad tech suffices.
Karrie Gordon: Nick, I know it’s an odd time to talk growth investing, but I think it’s worth discussing. After all, many investors likely carry heavy allocations to growth in their portfolios currently. With global trade war tensions rising, geopolitical risks escalating, and recession likelihood increasing in the last month, I believe it’s worth reevaluating artificial intelligence exposures. Instead of divestment, however, I think there’s a case to be made for retaining exposure but broadening it out a bit in the near- to midterm.
Nick Peters-Golden: Hi Karrie! Thanks for chatting with me on this topic. Investors have a lot on their plates right now. But I think we shouldn’t lose sight of some bigger questions; namely, do we really need pure-play, explicit AI strategies, or does a broader tech allocation suffice? Let’s find out!
AI Still a Key Player in How Tech Envisions the Future
Gordon: I know the outlook for artificial intelligence faces a number of challenges in the near term. I also think a lot of investors find themselves with at least some portfolio allocation to AI, either directly or indirectly. Investing in the Magnificent Seven at any point in the last few years meant investing in AI. When AI-centric stocks became a significant driver of returns in the last two years, investors piled in.
Now, with markets crashing on tariff concerns, those stocks are experiencing sharp declines, along with all equities. I will be the first to acknowledge that these stocks now carry a drastically different risk profile than even six months ago.
Artificial intelligence faces significant hurdles to development in the U.S. under the new tariff regime. It’s worth keeping in mind that the U.S. is not the only country racing to develop AI, however. Beyond that, artificial intelligence spans a number of applications and models, from large language and generative AI to robotics. While innovations tend to slow under recession or declining growth, they don’t stop entirely. And AI continues to evolve in its capabilities.
At the beginning of this year, MIT Technology Review flagged several new artificial intelligence trends to watch for. Among those are AI agents (arguably… not great in their current iteration, but with a long runway of potential), and also breakthroughs in science enabled by AI’s capability to process enormous data sets and tease out information. Whether it still sounds more science fiction than reality, artificial intelligence remains a key part of how the technology industry envisions the future. As long as it’s a focus and priority for the biggest movers and shakers in the market, it’s worth at least thoughtful consideration for those with the risk appetite this year.
Merits to Investing More Broadly in Tech
Peters-Golden: Here’s what I think. AI is a transformational technology akin to electricity and the internet. It’s going to enhance productivity in ways we can’t fully grasp right now. You want AI exposure in your portfolio. But pure-play AI? Funds just targeting AI, or even tech strategies that are potentially “overreliant” on AI? That’s where I have questions.
I think it’s important to talk about the merits of a broader tech approach in the first place. AI may be the sparkly object, but it isn’t the only area seeing innovation. Innovation means more than adding AI to something. Sure, adding AI can be a huge boon to pretty much any existing technology.
Those other technologies, however, can be iterated upon in other ways. Perhaps a new battery technology makes electric vehicles even “more” viable than before. A new cooling technique could be a game changer for data centers or logistics. Heck, even a new version of the ETF would itself be a technological advancement. A strict AI approach might miss out on other, powerful tech innovations.
So what does that all mean in ETF terms? Yes, you may want to have pure-play AI ETF exposure. You can get plenty of data centers or crypto miners or AI innovators. That said, you may miss out on the other innovations out there in a broad tech ETF. Balancing those is a key goal for investors in this environment.
AI Worth Consideration, But Through a Global Lens
Gordon: I won’t deny that the trade wars and tariffs happening have serious implications for artificial intelligence, particularly in the U.S. It’s actually because of this that I’d recommend for those investors who still want targeted exposure to seek funds that diversify a bit.
I think it’s going to be important to come at AI investing from a global perspective for the near- to midterm. Artificial intelligence innovation and development will likely falter in the U.S. due to material constraints (China is the primary global supplier of gallium and germanium, both critical resources used in semiconductor chips). However, that doesn’t mean the evolution of the industry will come to a stand-still globally. You need look no further than China’s DeepSeek success and disruption to see the potential within the space.
Funds like the ROBO Global Artificial Intelligence ETF (THNQ ) take a global approach while also investing across the AI ecosystem. The fund includes companies that develop the technology and infrastructure that AI relies on. It also includes companies using artificial intelligence in their business models. This creates a diversified portfolio while still focusing within the AI ecosystem. Meanwhile, the WsdomTree Artificial Intelligence and Innovation Fund (WTAI ) targets companies that help develop and/or deploy AI innovations, as well as companies that offer AI tech through a global lens.
The KraneShares Artificial Intelligence & Technology ETF (AGIX ) also invests globally across the AI ecosystem. In addition to screening for both “AI readiness” and “AI relevance,” AGIX invests not just in public companies but also private companies, such as Anthropic, added to the portfolio in Q1. The high-conviction strategy invests across three central pillars — infrastructure, hardware, and applications. Meanwhile, it also takes liquidity into consideration. AI funds like these, with a global tilt to them, may provide some opportunities beyond the constraints the U.S. will likely struggle with under the new tariff regime.
When the AI Risks Are Staring You in the Face
Peters-Golden: I think you’re underselling the risk that comes with AI. Let’s not forget that artificial intelligence has many of the hallmarks of a bubble. Even before we talk about tariffs, we need to acknowledge that AI could explode in investors’ faces. Tariffs could be the pinprick that pops the balloon.
Tariffs will harm the entire U.S. economy, as currently construed. That’s hard to avoid. AI could be particularly vulnerable to tariffs and the trade war, which shouldn’t be ignored.
Yes, semiconductors have been (temporarily) exempted. But the AI economy is a complicated beast. Data centers are remarkably complex businesses that could feel tariff pain from several angles. In terms of buildings, construction material costs are rising. Cooling materials have their own costs, as well, a particular point of pain given just how much heat data centers emit.
The massive walls of servers, however, are perhaps the biggest concern. The demand for computing power is a serious one and these data centers are ravenous for computing strength and electricity to fuel it.
Let’s revisit explicit tariffs on semiconductors. The president said that tariffs on semiconductors could be coming very soon. This key piece of tech is the crux of providing walls of servers and chips with the power needed to make your dog look like it’s in a Studio Ghibli film. The knock-on impact of tariffs on that linchpin part of data centers could take a severe toll on AI-specific investing strategies.
Now, I recognize that a broader tech strategy would also experience tariff pain. Of course, it could be more spread out, given potential diversification. Biotech or health technology, for example, could benefit more quickly from potential rate cuts if a recession hits. What’s more, tech in more defensive areas like healthcare could prove more durable than the still-young field of AI.
Innovations & Disruptions Still Happen, Even in a Recession
Gordon: There are serious arguments to be made that AI became a bubble in markets. While we’re seeing some signs of that popping on recession and trade war concerns, many of the underlying fundamentals that drove the rise of AI still exist. Whether you believe artificial intelligence is the next major evolution of modern technology or think it’s a scam, there’s no denying it will cause disruptions in industries in the near future. No matter how you feel about it, for now, AI remains the face of growth in today’s markets.
Should the U.S. and global economy tumble into a recession in the next year or two, growth faces considerable challenges. And while there have been signs of slowing in AI development in the last six months, the DeepSeek disruption proves how rapidly the industry is capable of evolving and innovating. DeepSeek burst onto the scene several months ago with generative AI models that compete with top offerings from OpenAI. However, it is both largely open-source and also uses less-advanced chips, costing fractions of current AI models cost.
The ability to build AI models using cheaper chips opens the playing field to a greater range of players that previously lacked access. Affordability also widens potential innovation and adoption within the AI ecosystem. This in turn could create trickle-through effects for technology stocks, as the biggest players (the Magnificent Seven) are already heavily invested in AI. As such, I believe there’s an argument to be made for retaining a level of targeted AI exposure, but through a global lens, like the funds I discussed previously — a sort of “straight from the horse’s mouth” approach to capturing the main driver of innovation happening within the tech sector.
See also: DeepSeek a Pivotal Turning Point for China’s AI Revolution
Combine the Benefits of Tech Diversification With Active Management
Peters-Golden: Broader tech isn’t just an option for diversification — we shouldn’t forget the upside in a broader innovation approach.
The T Rowe Price Technology ETF (TTEQ) presents one strong option. The first of T. Rowe Price’s more thematic active ETFs, TTEQ’s manager, Dom Rizzo, has built it from the bottom up to focus on innovation. It doesn’t just invest in AI — though of course it includes targeted exposures there — but in tech across key sectors.
TTEQ has exposure to the lead tech names that drove so much of last year’s performance, yes. However, it also invests in some rising names, identified in part thanks to T. Rowe Price’s global research platform. TTEQ invests in firms like Infineon (IFNNY) as well as Cadence Design Systems (CDNS) that have an important role to play in AI.
What’s more, it also invests in consumer names like Nintendo (NTDOY) and e-commerce firms like Mercado Libre (MELI). Those firms both are innovators in their respective areas with strong advantages in important markets.
The strategy also offers an “active” investing approach. Active can outperform in volatility. Many pure-play AI funds take a thematic, passive ETF approach. While fine-tuning such a fund’s index, does, of course, take countless hours of effort, an active approach does the same with greater adaptability.
When it comes to portfolio construction, then, how might investors want to approach this AI versus broad tech debate? It’s hard to ignore having just one thematic tech strategy to add in that satellite role — or even as a core allocation, given how large a role tech plays in portfolios overall. Pure-play AI maybe would’ve made sense in the last three years. Looking ahead, however, a broader tech fund, to me, is the right move.
VettaFi LLC (“VettaFi”) is the index provider for THNQ, for which it receives an index licensing fee. However, THNQ is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of THNQ.
For more news, information, and analysis, visit the Artificial Intelligence Channel.
