Value ETFs Quietly Gain Ground While Hiding AI Exposure

Value exchange-traded funds are pulling ahead of their growth-oriented counterparts in a notable market shift, yet a closer look under the hood reveals that many of these so-called value funds carry significant exposure to the artificial intelligence boom that has defined recent market cycles. The divergence raises fresh questions about what "value" actually means in today's investment landscape.

For years, growth ETFs dominated returns, fueled largely by mega-cap technology companies racing to build out AI infrastructure and platforms. Now, as valuations in that space have stretched and interest rates have remained elevated, investors have rotated toward funds that screen for cheaper, more fundamentally grounded stocks — traditionally the hallmark of the value investing philosophy.

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But the line between value and growth has blurred considerably. Many value ETFs, which use metrics like price-to-earnings and price-to-book ratios to select holdings, still land on established tech giants that have become central players in the AI economy. Those companies, once considered expensive growth bets, now appear in value screens precisely because their earnings have expanded enough to make them look attractively priced relative to profits.

The dynamic creates a paradox for investors seeking genuine diversification away from the AI trade: the funds they choose to escape that concentration may quietly deliver much of the same exposure. Portfolio construction and index methodology matter enormously here, and investors would be wise to examine fund holdings rather than rely solely on a fund's style label.

As the performance gap between value and growth continues to attract attention, the underlying question is whether value ETFs are genuinely outperforming on fundamentals or simply riding a rotation that still has AI at its core. Continue reading at Yahoo.