Artificial intelligence (AI) has undoubtedly been one of the hottest areas of innovation for asset managers this year and the rush to bring new ETFs to appeal to investors looks certain to gather pace in 2025.

US investors can now choose between more than 40 ETFs that include the terms “artificial intelligence” or AI in their title, according to ETF.com, but the range currently available in Europe is more limited with only a dozen listings shown on ETFbook.

BlackRock this week expanded the choices available to European investors with the launch of a new pair of strategies – the iShares AI Infrastructure UCITS ETF (AINF) and the iShares AI Adopters & Applications UCITS ETF (AIAA) – which are listed on the London Stock Exchange, Euronext Amsterdam, Euronext Paris and Deutsche Borse with total expense ratios (TERs) of 0.35%.

The launches could hardly be described as nimble given that the world’s largest asset manager debuted the US-listed iShares Future AI & Tech ETF (ARTY) as long ago as June 2018 since when it has gathered assets of $672m.

Accompanying the launch, Tony Kim, or possibly an AI generated avatar of the head of the global technology team in BlackRock’s fundamental equities division, appeared via a recording from San Francisco to predict that the world’s entire computer system would be revolutionised by new AI capabilities.

The educational materials helpfully provided to press luddites by BlackRock explained that the AI ecosystem could be best understood as a cake with three layers.

The foundational “infrastructure” layer including chip manufacturers and hyperscale cloud data companies is where most of the value from AI has been captured so far. A middle “intelligence” layer comprising of data providers and builders of large language models and other frontier AI models followed by a top layer of AI “applications and services” which BlackRock envisages will involve thousands of companies as these new capabilities will eventually lead to a rebuilding of the internet globally.

BlackRock is certainly not alone in making truly extraordinary predictions about the impact of AI. The IMF in January estimated that about 30 percent of the jobs in advanced economies could find some of their key functions replaced by AI, resulting in lower demand for labour and reductions in wages.

Meanwhile cumulative business spending on AI will have grown to $19.9trn by 2030, according to the International Data Corporation. The consultancy in September also forecast that AI would account for 3.5% of global GDP in 2030.

Other asset managers are, unsurprisingly, also aiming to exploit the AI bandwagon with Invesco bringing out the Invesco Artificial Intelligence Enablers UCITS ETF (IVAI) in November while Cathy Wood’s Ark Invest attracted a fanfare of publicity when it brought several of its "disruptive innovations" strategies to Europe in April, including the launch of the ARK Artificial Intelligence & Robotics UCITS ETF (ARKI) which has since attracted assets of just $19m.

However, only three of the dedicated AI ETFs listed in Europe have so far gained any real traction with investors. The Xtrackers Artificial Intelligence & Big Data UCITS ETF (XAIX) has built assets of $4.2bn, while assets held by WisdomTree Artificial Intelligence UCITS ETF (WTAI) have reached $800m and the L&G Artificial Intelligence UCITS ETF (AIAI) holds $786m, according to ETFbook.

My impression is that asset managers could struggle to explain how these more focused AI ETFs can fit into an investor’s portfolio, particularly if they already have exposure to many of the companies expected to from the AI revolution via ETFs tracking the Nasdaq index or even the broader US stock market.

Eye-watering valuations for AI ETFs must also be an ongoing concern for investors. BlackRock’s US-listed ARTY for example is trading on a price to trailing earnings multiple of 46.8x, a significant valuation premium to BlackRock's S&P 500 tracker IVV which is is trading on a PE ratio of 29.9, close to its all-time high.

All of the other available AI ETFs are trading on similarly elevated valuations. Many companies will need to deliver massive improvements in their earnings if the current wave of investor enthusiasm towards AI is to avoid meeting with disappointment.