Advisors Shift to Income, Diversified ETFs Amid AI Optimism

Surveys conducted by VettaFi over the past month found advisors and retail investors increasing allocations to income-producing and diversified ETFs while maintaining exposure to AI, energy and semiconductors. Responses reflected concern about persistent inflation alongside a strong jobs market and an earnings season that exceeded expectations.

Respondents ranked risk management and income generation as top portfolio priorities. Macroeconomic factors have taken a larger role in sector allocation decisions this year. Market participants are watching the Federal Reserve meeting on June 16–17; the CME FedWatch Tool showed about a 96% probability the Fed would hold rates at that meeting, while markets price a modest chance of a rate rise by the end of 2026.

Interest in AI-related strategies remains, with demand concentrated in infrastructure and related energy exposure. Semiconductor-focused ETFs have seen substantial flows: the VanEck Semiconductor ETF (SMH) and the iShares Semiconductor ETF (SOXX) have taken in more than $8.5 billion combined year to date. The Roundhill Memory ETF (DRAM) registered about $12.7 billion in net inflows. Longstanding theme funds such as ROBO and THNQ continued to attract assets.

Investors are broadening income strategies beyond short-term Treasuries. The iShares 0-3 Month Treasury Bond ETF (SGOV) recorded roughly $25 billion of net inflows year to date, and the ProShares GENIUS Money Market ETF (IQMM) about $21 billion. Advisors and asset managers are also allocating to higher-yielding fixed-income sectors to address inflation’s effect on cash purchasing power.

Flows into credit and options-based income ETFs have been significant. Collateralized loan obligation ETFs drew nearly $10 billion in combined net new assets across providers including PGIM, Janus Henderson, iShares and Reckoner Capital. Options-income products showed strong net inflows: JPMorgan’s JEPI and JEPQ together gathered more than $9.7 billion this year, and high-distribution NEOS funds tied to the Nasdaq 100 and S&P 500 amassed close to $8 billion.

VettaFi reported that many advisors signaled rising allocations to diversified income solutions, risk-mitigation tools and sector positions linked to AI and energy infrastructure. The ETF market has recorded nearly $900 billion of net new assets year to date and is tracking toward a possible $2 trillion total for the year.

Looking ahead, advisors and investors said they would monitor the Fed meeting and an anticipated SpaceX initial public offering as potential market catalysts. VettaFi plans continued engagement with advisors and retail investors, including a Midyear Market Outlook Symposium on June 25.

Disclosure: VettaFi is the index provider for ROBO and THNQ and receives an index licensing fee; ROBO and THNQ are not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation related to their issuance or trading.