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Surge in AI-Driven Power Infrastructure ETFs: Performance, Drivers, and Future Outlook

General Report May 18, 2025
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TABLE OF CONTENTS

  1. Summary
  2. Launch and Composition of AI Power Infrastructure ETFs
  3. Q3–Q4 2024 Performance Surge
  4. Drivers Behind the Rally
  5. Outlook under U.S. Infrastructure Policy
  6. Implications for Investors
  7. Conclusion

1. Summary

  • Between mid-2024 and the end of 2024, a remarkable surge took place in AI-powered power infrastructure exchange-traded funds (ETFs), primarily driven by robust demand for AI semiconductors and significant U.S. infrastructure spending initiatives. Following their launch in July 2024, ETFs such as KODEX AI Power Core Facilities experienced impressive returns ranging from 20% to 28% in a matter of weeks. These performance metrics are rooted in a variety of key drivers, including the rapid proliferation of data centers essential for AI applications, advancements in nuclear power capabilities, and sweeping federal investment programs. The implications of these trends signal a compelling landscape for investors seeking exposure to these sectors.

  • As we analyze these ETFs, it is noteworthy that the KODEX AI Power Core Facilities ETF largely comprises leading South Korean companies like Hyosung Heavy, HD Hyundai Electric, and LS Electric, which constitute about 77% of its holdings. In tandem, the U.S. equivalent ETFs are investing in significant players such as Constellation Energy and Vertiv Holdings, thus creating a diverse portfolio that provides proactive participation in the evolving power infrastructure paradigm. Notably, the favorable economic climate and sustained demand for AI technology boosted investor sentiment, leading to a pronounced recovery in these ETFs, especially amid broader market fluctuations concerning AI investments.

  • Looking ahead to the future, President Donald Trump’s inauguration in January 2025 heralds a continuation of infrastructure spending, which is expected to further boost the performance of these ETFs. With strategic government policies aligned toward advancing both the semiconductor and power sectors, investors can anticipate sustained growth potential. This structured growth amidst AI technology adoption provides a compelling case for diversified investments in power infrastructure ETFs, highlighting the importance of examining both domestic and international market trends in the face of shifting technological demands.

2. Launch and Composition of AI Power Infrastructure ETFs

  • 2-1. July 2024 ETF launches

  • In July 2024, the financial landscape witnessed the introduction of several AI-focused power infrastructure exchange-traded funds (ETFs). Notable among these were the KODEX AI Power Core Facilities and its U.S. counterpart, which aimed to capitalize on the booming demand in the AI semiconductor sector. These newly launched ETFs were designed to enable investors to gain exposure to companies pivotal in the infrastructure required to support the growing demands of AI and data analytics, a reflection of the ongoing digital revolution.

  • 2-2. Fund composition: Korean and U.S. offerings

  • The KODEX AI Power Core Facilities ETF primarily invested in leading South Korean companies in the power infrastructure sector, such as Hyosung Heavy, HD Hyundai Electric, and LS Electric. Together, these companies made up approximately 77% of the ETF's holdings, with specific allocations being 20.74% for LS Electric, 20.15% for HD Hyundai Electric, and 16.03% for Hyosung Heavy. Concurrently, the U.S. equivalent ETF focused on major firms influencing the American market, facilitating a broader approach for investors intending to diversify their portfolios by geographic exposure.

  • 2-3. Key corporate constituents

  • The success of these power infrastructure ETFs was driven by the inclusion of significant corporate constituents within their portfolios. For instance, the KODEX ETF’s holdings reflect South Korea's strategic position in the global power infrastructure landscape, with companies like Constellation Energy and Vertiv Holdings are also notable players in the U.S. market. The selection of these corporations underscores their vital roles in transitioning towards renewable energy sources and enhancing data center efficiency, thus reflecting the ETFs' focus on sustainable and adaptive solutions as the demand for power continues to soar in response to increased AI adoption.

3. Q3–Q4 2024 Performance Surge

  • 3-1. One-month return spikes in October 2024

  • In October 2024, the AI-driven power infrastructure ETFs demonstrated remarkable performance, with significant returns observed within a single month. Notably, the KODEX U.S. AI Power Core Facilities ETF surged by 27.51%, in sharp contrast to the prior months' downturn in the power and infrastructure sectors. Concurrently, the SOL U.S. AI Infrastructure ETF, which includes major companies like Constellation Energy and Vertiv Holdings, recorded a robust gain of 21.74%.

  • This performance surge occurred against a backdrop of increasing demand for AI semiconductors, even as some investors expressed concerns regarding potential market saturation in the AI space. Despite these apprehensions, the data supported a recovery in investor sentiment, attributed to the resilience of semiconductor demand and renewed infrastructure investments by the Biden administration, which focused on modernizing power grids and enhancing renewable energy sources.

  • 3-2. Comparative gains: Korean vs. U.S. ETFs

  • When analyzing the comparative performance of Korean and U.S. power infrastructure ETFs during this period, distinct trends emerged. The KODEX AI Power Core Facilities ETF, which focuses on South Korean power equipment firms, saw a commendable return of 11.85% over the same timeframe. Key constituents such as Hyosung Heavy Industries, HD Hyundai Electric, and LS Electric experienced impressive stock price increases, with Hyosung Heavy achieving a remarkable 28.84% rise in just one month. This indicates not only a robust recovery in the domestic market but also an effective response to international demand for AI-related infrastructure solutions.

  • In comparison, the U.S. ETFs outperformed their Korean counterparts, reflecting stronger investor confidence and the backing of significant federal infrastructure spending. This performance variance underscores the potential for U.S. firms to capitalize on larger infrastructure packages and a broader recovery in the AI sector, indicative of a more aggressive market positioning.

  • 3-3. Top-performing holdings and realized returns

  • Within the frameworks of both U.S. and Korean ETFs, specific corporate holdings stood out for their performance. Companies like Constellation Energy, which leads in the nuclear sector, and Vertiv Holdings, known for their expertise in data center power solutions, were among the top contributors to the respective ETFs' gains. The solid performance of these stocks not only led to high realized returns for ETF investors but also reinforced the vital role these firms play in the evolving power landscape.

  • Importantly, as investments surged and the infrastructure sector transitioned into a 'super cycle,' the focus on AI technology and its applicability in enhancing energy production efficiency became pivotal. This confluence of technology and utility demonstrated how critical these companies are as foundational components of future energy strategies, appealing to both short-term investors looking for rapid gains and long-term investors focused on sustainable growth options.

4. Drivers Behind the Rally

  • 4-1. Resilient AI Semiconductor Demand

  • The recent surge in the performance of power infrastructure ETFs can largely be attributed to the resilient demand for AI semiconductors. Despite concerns regarding a potential peak in AI investments, the demand for these semiconductors has remained strong, driving investor confidence. Notably, concerns about the sustainability of this demand came to light in mid-2024 when NVIDIA's stock faced volatility, suggesting uncertainties in the broader AI investment landscape. However, as NVIDIA's stock rebounded in late 2024, the associated investments in power infrastructure also gained momentum. This interdependence between AI semiconductor performance and power sector profits illustrates a symbiotic relationship that has fueled recent ETF gains. Data indicates that as operational needs for AI applications expand, so too does the necessity for robust power infrastructure, particularly in data centers where energy consumption is surging.

  • Research from KB Securities has highlighted that the energy demand emanating from AI developments is expected to grow significantly over the next decade. This projected increase in energy needs, coupled with the backdrop of a global 'super cycle' in the power industry, underpins the optimism surrounding AI-driven investment strategies. Investors are poised to benefit not only from the growth in AI technology but also from improvements in power systems needed to sustain this momentum.

  • 4-2. Data Center Power Needs

  • The increased power requirements of data centers have also been a significant driver behind the rally in power infrastructure ETFs. With the rapid expansion of AI applications, data centers are being constructed at an accelerated rate, demanding larger and more consistent power supplies. According to industry analyses, by 2030, the capacity of the U.S. transmission network must increase by approximately 14% from 2020 levels, and by 2050, this will need to rise by nearly 49% to meet anticipated demand. This projected growth signals a clear opportunity for investors in firms that provide the necessary infrastructure to support these burgeoning power needs.

  • As evidenced by the performance of specific ETFs such as KODEX U.S. AI Power Core, which recorded a striking 27.51% rise shortly before November 2024, the connection between data center expansion and ETF success is clear. The focus on major players like Constellation Energy and Vertiv Holdings, which provide vital services to these data centers, reinforces the investment thesis that the increasing power requirements will sustain ETF returns in the foreseeable future.

  • 4-3. U.S. Infrastructure Investment Boost

  • A substantial boost in U.S. infrastructure investment has catalyzed the performance of power infrastructure ETFs, adding another layer of support for their recent gains. The Biden administration has committed to extensive infrastructure projects aimed at overhauling aging power networks and increasing renewable energy sources, driving optimism among investors. This proposed investment aligns perfectly with the operational timelines and demands of the AI sector, reinforcing the critical need for enhanced infrastructure.

  • As infrastructure spending grew throughout 2024, investor sentiment shifted positively, contributing to a favorable climate for power-related companies. Reports illustrated that infrastructure-driven investments have translated into measurable stock performance; for instance, ETFs focusing on U.S. energy infrastructure have performed notably well amid these changes. The clear alignment between federal policy direction and market performance has underscored the importance of strategic governmental investment as a key driver for these ETFs, affirming that sustained governmental support will likely yield ongoing benefits for the sector into 2025 and beyond.

5. Outlook under U.S. Infrastructure Policy

  • 5-1. Impact of Trump’s January 2025 inauguration

  • The inauguration of Donald Trump in January 2025 is anticipated to significantly influence U.S. infrastructure investment policies. Following a government framework prioritizing domestic infrastructure enhancement and technology investments, Trump's administration is expected to leverage the initial success of AI-driven power infrastructure ETFs to push for further federal allocations. There is consensus among industry analysts that Trump's pro-business stance, particularly concerning the semiconductor and energy sectors, will likely serve as a catalyst for sustained investment in these areas. The alignment of strategic interests in bolstering national infrastructure will be crucial, particularly in the light of the rapid advancements and expansion needs associated with AI technologies. Furthermore, stakeholders are monitoring how Trump's re-election policies might reinforce commitments to infrastructure development, potentially leading to increased capital inflows into related ETFs.

  • 5-2. Expected federal spending continuation

  • Projected federal spending on infrastructure is expected to continue well into 2025 and beyond, primarily as an outcome of Trump's re-election. Analysts anticipate that the government will persist in its commitment to substantial funding for infrastructures such as energy grids, data centers, and power supply enhancements. The ongoing trend aligns with previous policies that sought to revitalize aging infrastructure and adapt it to meet the burgeoning demands of the AI sector. Financial analysts predict that this trajectory will sustain increasing returns for ETFs focused on the infrastructure space as they benefit from this long-term funding assurance. Moreover, these investments aim to address critical areas such as renewable energy adoption and smart technology implementation, underscoring a forward-looking approach to U.S. energy policy.

  • 5-3. Long-term growth catalysts

  • Several long-term growth catalysts are poised to drive the performance of AI power infrastructure ETFs post-Trump’s inauguration. Chief among these is the anticipated acceleration of AI technology adoption across various sectors, necessitating substantial energy and data processing capabilities. The expanded use of AI in industries indicates a growing need for improved infrastructure solutions, particularly those enhancing energy efficiency and capacity. Additionally, geopolitical considerations, including climate change legislation and energy independence strategies, are expected to bolster government incentives for renewable energy projects. The integration of AI with energy infrastructure also signifies a transition towards more resilient and adaptive energy systems, which is likely to create further investment opportunities within this domain. As industries pivot towards sustainable practices, competition in the AI power infrastructure ETF landscape may foster innovation and drive new growth trajectories.

6. Implications for Investors

  • 6-1. Portfolio positioning strategies

  • As of May 18, 2025, investors in the AI-driven power infrastructure ETFs should consider an adaptable portfolio positioning approach that takes into account the rapidly evolving landscape of both AI technology and infrastructure spending. Given the strong performance of ETFs such as KODEX AI Power Core Facilities, which surged between 20% to 28% shortly after their launch amidst escalating demand for AI-driven power solutions, diversifying within the sector is key. Investors may find value in a mix of geographically diverse ETFs, which includes both Korean and U.S.-based offerings, thereby tapping into different growth trajectories. Allocating resources to top-performing companies in this sector, such as Constellation Energy and Vertiv Holdings, can enhance overall portfolio resilience and capitalize on segment-specific opportunities.

  • 6-2. Risk considerations and diversification

  • The investor landscape for AI power infrastructure ETFs remains partially illuminated by past performance data, but it is imperative to analyze the inherent risks associated with such investments. The substantial dependence on AI semiconductor demand positions these ETFs at the mercy of technological advancements and market fluctuations. The ongoing developments in infrastructure policy under President Trump's administration may provide a favorable backdrop; however, unforeseen geopolitical events or economic downturns could introduce volatility. Thus, a diversification strategy that spans various industries and markets can mitigate risks associated with sector-specific downturns. Investors should also remain vigilant regarding earnings reports from key holdings and federal spending announcements, as these could significantly impact ETF valuations.

  • 6-3. Monitoring policy and sector developments

  • Keeping abreast of policy changes and sector developments is crucial for investors involved in AI-driven power infrastructure ETFs. The re-election of President Trump in January 2025 has likely solidified a trajectory of sustained infrastructure spending, which can influence the expansion and profitability of these funds. Initiatives aimed at bolstering U.S. infrastructure, including potential new federal programs or extensions of existing ones, should be closely monitored. Additionally, developments in the semiconductor sector—such as new technologies or shifts in consumer demand—can substantially impact performance dynamics. Proactive monitoring of such factors will enable investors to make informed decisions regarding the timing of their investments, helping them navigate the fluid market landscape effectively.

Conclusion

  • The recent boom in AI-driven power infrastructure ETFs signifies a pivotal moment in the interplay between technological demands and infrastructural advancements. In late 2024, the substantial increases in ETF valuations—ranging typically between 20% and 28%—illustrate the significant influence that resilient semiconductor demand and federal infrastructure initiatives have on market dynamics. Investors who capitalized on the launch of these funds have enjoyed considerable returns, further underscoring the relevance of key holdings such as Constellation Energy and Vertiv Holdings, which are vital providers in their respective niches within the nuclear energy and data center sectors.

  • As we look forward, the political landscape, shaped by President Trump's re-election and its accompanying policy directives, is likely to reinforce the momentum for further investment in infrastructure. The prospect of continued federal support for the power supply and technology sectors further cements the growth outlook for these ETFs. Nevertheless, it is vital for investors to adopt a nuanced approach in their strategic allocation, striking the right balance between anticipated governmental tailwinds and potential sector volatility. Moreover, diversification across geographic lines and correlating sectors will prove instrumental in mitigating risks and capturing emerging opportunities.

  • Ultimately, keeping a pulse on corporate performances alongside government spending activities will enable investors not just to adapt their portfolio positioning but to effectively navigate the complexities of this dynamic market landscape. As the intersection of AI and power infrastructure continues to evolve, the strategic foresight of investors will be paramount in harnessing the long-term growth potential embedded within these ETFs.

Glossary

  • AI Semiconductor: AI semiconductors are specialized chips designed to accelerate machine learning and artificial intelligence processes. Their demand has surged due to the growing need for efficient data processing power in applications such as data centers and AI-enabled technologies. As of May 2025, sustained demand for these semiconductors plays a pivotal role in driving investor interest in related sectors.
  • Power Infrastructure ETFs: Exchange-Traded Funds (ETFs) focused on power infrastructure invest in companies involved in the generation, distribution, and management of power supply systems. The recent emergence of AI-driven power infrastructure ETFs from mid-2024 reflects the strong growth in AI technology and infrastructure spending, particularly in the U.S.
  • KODEX: KODEX is a brand of exchange-traded funds that features several investment products on the South Korean stock market. The KODEX AI Power Core Facilities ETF specifically targets companies in the power infrastructure sector, particularly those enhancing capabilities related to AI and data centers.
  • Constellation Energy: A leading U.S. energy company focusing on nuclear power generation and renewable energy solutions. Currently a significant component in AI-driven power infrastructure ETFs, Constellation Energy plays a crucial role in the evolving power landscape, especially amid rising demands for energy efficiency in AI applications.
  • Vertiv Holdings: Vertiv Holdings specializes in infrastructure technologies critical for data centers, including power management systems. As of May 2025, Vertiv is recognized as a key player in the power infrastructure sector and a notable holding in AI-focused ETFs, reflecting its importance in supporting the growing data center market.
  • Investment Sentiment: Investment sentiment refers to the overall attitude of investors toward a particular market or security, which can be optimistic or pessimistic. Positive sentiment toward AI-driven sectors has contributed to significant gains in related ETFs, especially in response to strong demand forecasts and supportive government policies.
  • Infrastructure Investment: Investment in physical systems such as transportation, communication networks, and power generation infrastructure. Following the recent policy directions, significant federal spending in the U.S. aims at renewing and enhancing these infrastructures, benefiting sectors tied to AI technology and power supply.
  • Market Outlook: Market outlook provides a forecast regarding how specific sectors or financial instruments are expected to perform based on current data and trends. As of May 2025, the outlook for AI-driven ETFs appears positive due to ongoing infrastructure investments and expected expansions in AI technology.
  • Super Cycle: A super cycle refers to a prolonged period of sustained growth and high demand for a commodity or asset class. In the context of energy and power infrastructure, experts suggest a super cycle due to a consistent surge in energy needs driven by advancements in AI and data centers expected over the next decade.
  • Federal Infrastructure Spending: Federal infrastructure spending encompasses government allocations aimed at enhancing the country’s physical infrastructure including energy grids and transportation networks. The projected continuity of such spending, particularly under President Trump's administration, is anticipated to bolster growth in sectors reliant on power infrastructure.
  • AI Data Center Buildouts: AI data center buildouts involve the construction and upgrading of data centers optimized for AI processing and data analytics tasks. As demand for AI technologies expands, significant investment in these facilities is expected to create substantial opportunities for infrastructure funds and ETFs.

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