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ETF Prime: Zeno Mercer on AI ETFs & the AI Bubble Debate

BY | ETF Database
11:12 am ET 10/21/26 | 12 VIEWS
Artificial intelligence (AI) ETFs can capture growth that broad market funds miss, according to Zeno Mercer, head of robotics and AI research at VettaFi. Mercer joined ETF Prime host Nate Geraci to discuss whether heavy AI spending will pay off.Key Takeaways: Mercer says AI is in a J-curve, with heavy spending now before the payoff arrives. Mercer favors AI suppliers with several growth sources over narrow, single-theme funds. Chan expects inflation to stay higher for longer and sees AI in its third or fourth inning. Mercer co-developed the index behind the ROBO Global Artificial Intelligence ETF (THNQ B-), which recently topped $500 million in assets. He tied the recent AI pullback partly to debt financing concerns at AI cloud providers like CoreWeave, Inc. (CRWV). Still, Mercer sees a long runway ahead. AI is in what he calls a “J-curve,” where heavy spending and rising energy costs come before the payoff. Many of those pain points could fade within about five years. See more: AI ETFs: Beyond Chips & Hyperscalers Physical AI, or robots doing real-world work, is the next big wave. Millions of people already wear sensor gloves to teach AI physical tasks, Mercer said. Manufacturing alone employs about 300 million workers worldwide.Looking Past the Hyperscalers With AI ETFsBroad index funds may not be enough to capture that growth. Mercer said the Vanguard S&P 500 ETF (VOO A) has trailed about 95% of AI strategies this year, many of which are up 30% to 50%. Smaller suppliers selling into AI can grow faster than the largest companies. However, he cautioned against getting too narrow and prefers areas with several sources of growth. Photonics, or light-based technology, serves data centers as well as welding lasers and lidar. Mercer is also skeptical of ETFs that let AI pick stocks on its own. “If everyone is getting the same advice, there’s no alpha,” he said, referring to market-beating returns. A mix of human and AI judgment will likely lead until those funds show multiyear results. Geraci also spoke with Howard Chan, founder and CEO of Kurv Investment Management. A former PIMCO executive, Chan launched the firm after the SEC’s 2019 derivatives rule opened ETFs to institutional options strategies. Chan expects inflation to stay “higher for longer” because refineries shut during the Middle East war could take years to restart. For that backdrop, the Kurv Gold Enhanced Income ETF (KGLD ) uses options to generate income from gold. The Kurv Technology Titan Select ETF (KQQQ A) uses call spreads to keep more upside than a standard covered call. On AI, Chan sees the buildout in the “third or fourth inning” and prefers suppliers earning cash from hyperscaler spending.Listen to the Entire Episode of ETF PrimeFor more ETF Prime podcast episodes, visit our ETF Prime Content Hub. vettafi.com is owned by VettaFi LLC (“VettaFi”). 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. VettaFi and its affiliates have no obligation or liability in connection with the issuance, administration, marketing, or trading of THNQ.

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