By Suzanne McGee

(Reuters) – The fervor around artificial intelligence has sparked a gold rush into AI-themed ETFs, as investors seek fresh ways to play the burgeoning technology following breathtaking rallies in market darlings such as Nvidia.

The funds run the gamut from those offering a bouquet of the biggest AI winners to more esoteric themes such as robotics and sound generation. All told, the universe of AI-themed ETFs traded in the United States has soared to $6.88 billion as of the end of February from $2.55 billion a year earlier, Morningstar data showed.

“It’s still so early in the evolution of this category … that investors are still sorting through the possibilities,” said Will Rhind, founder and CEO of GraniteShares.

The exuberance surrounding AI funds echoes previous waves of investor excitement for other technologies viewed as transformative, from dotcom stocks to electric vehicles.

Each wave introduced major new businesses to the economy and generated astonishing wealth for founders like Jeff Bezos and Elon Musk as well as ordinary investors. At the same time, many of the companies whose shares soared in previous market booms eventually saw their stock prices fizzle, a fate that may await some of the market’s current AI favorites.

For now, investors are responding with enthusiasm and Nvidia – whose chips are seen as the gold standard in AI – continues to grab the spotlight.

The assets of the GraniteShares 2x Long NVDA Daily ETF, which seeks to deliver twice the daily return of the chipmaker’s shares and is not included in Morningstar’s data on AI-themed funds, doubled to $2 billion earlier this month. Those flows have followed the nearly 80% climb in Nvidia’s shares so far this year, after the company’s shares tripled in 2023.

At its developer conference on Monday, the company unveiled the Blackwell B200, an AI chip it says is up to 30 times speedier than its previous chip.

Smaller ETFs have also prospered. Assets in the Themes Generative Artificial Intelligence ETF tripled to about $20 million from $7.5 million earlier this month, said Taylor Krystkowiak, investment strategist at Themes ETFs.

Seven of the 18 diversified AI-related ETFs that Morningstar tracks have launched within the last three years. An eighth was redesigned to target AI more directly.

The funds have had collective inflows of $2.68 billion in the last 12 months, according to Morningstar. That is almost double the inflows into global real estate ETFs, the company said.

Whether investor excitement about the possibilities of AI is fueling a bubble or just contributing to a strong bull run in stocks is unclear.

The S&P 500 is up nearly 8% year-to-date, fueled in part by rallies in AI beneficiaries such as Nvidia and Microsoft, following a 24% gain last year. The AI fervor has also driven parabolic moves in the shares of other companies, including a more than 250% gain in Super Micro Computer, which joined the S&P 500 this week.

Some investors appear to be limiting their exposure to Nvidia and other stocks that have notched big moves. ETF issuer Global X found that its Global X Artificial Intelligence and Technology ETF, which caps Nvidia exposure to 3%, has tripled in size over the last three months.

By comparison, its Robotics and Artificial Intelligence ETF, which has more than 20% of its assets invested in the chipmaker, grew by 20%.

Others are focused on finding new areas that will benefit from AI, said Rene Reyna, head of thematic ETF strategy at Invesco and manager of the Invesco AI and Next Gen Software ETF <IGPT. N>.

“The conversations we have with investors don’t focus on finding the next Nvidia, but more on recognizing that these technologies are changing the landscape and finding ways to get exposure to some of this growth,” he said.

Analysts at Morgan Stanley last week published a list of 480 individual stocks that may benefit from AI. Less obvious beneficiaries included Walmart and Caterpillar. The bank also recommended exploring “less crowded sub-themes” like the integration of AI and smartphones.

ETFs are also scrambling to provide offerings for every taste. Robo Global Robotics & Automation ETF supplements its Nvidia exposure with holdings in stocks some expect to benefit from AI technology, like Intuitive Surgical. The Roundhill Generative AI & Technology ETF is focusing on companies it expects to be beneficiaries of generative AI, including Salesforce.com and Marvell Technology.

Still, at least one flavor of AI-themed ETF has failed to win fans. The WisdomTree US AI Enhanced Value ETF, which uses AI to select its portfolio, has seen outflows of $48.26 million in the last 12 months and lags the S&P 500.

One possible reason the fund and others in its category have underperformed: many of them lack a position in Nvidia and other AI-related stocks.