Beware the IVES of March: Why This Rookie ETF May Be a Shakespearean Tragedy in the Making

The Dan Ives Wedbush AI Revolution ETF (IVES), managed by popular tech analyst and wearer-of-loud-sport-jackets Dan Ives, is a fund I first covered in this article last September. 

Launched during a period of peak artificial intelligence (AI) euphoria, the current landscape has turned into a rigorous stress test for the AI revolution thesis. As shown here, it has been a rollercoaster ride resulting in no real gain since then.

The exchange-traded fund (ETF) is currently off year-to-date, reflecting a broader pivot in market sentiment. Investors are no longer buying the dream but are instead demanding proof of monetization. The primary challenge for IVES in this environment is its heavy concentration in the high-multiple technology and communication services sectors, which together account for more than 75% of the portfolio.

Is the IVES ETF a Tragedy in the Making?

While IVES has used the tailwinds of Mr. Ives' surge in popularity amid the AI melt-up over the past few years, it is timely to recall that Shakespeare line from his iconic play Julius Caesar: Beware the Ides of March. Except in this case, the tragedy could be the listed price of the IVES ETF, should the AI trade take a tumble.

While the fund includes hardware stalwarts like Nvidia (NVDA) and Taiwan Semiconductor (TSM), it is also deeply exposed to software and platform giants that are facing a new and distinct threat known as AI disruption risk. 

Software stocks across the board were recently hit by fears that new generative AI coding and automation tools might actually cannibalize the traditional subscription models of established firms. This narrative has caused a significant rotation out of software-heavy tech ETFs and into hardware or defensive sectors, leaving funds like IVES vulnerable to sharp downward swings when the software side of the AI trade falters.

If the AI trade continues to struggle through the remainder of March, the fundamental narrative for IVES could shift from one of growth to one of valuation reset. The fund currently sports a trailing price-to-earnings (P/E) ratio of 42x, which ironically matches the one-year trailing earnings growth of its portfolio, when its 30-stock basket is weighted as it is in the ETF. That leaves very little room for error if earnings growth across the top-10 holdings begins to decelerate. 

Massive capital expenditure cycles of the hyperscalers are now being scrutinized by a market that is increasingly worried about the return on investment for these multi-billion-dollar annual spends. If these giants signal a slowing of their infrastructure buildout, the hardware half of the IVES portfolio could lose its primary engine of growth, compounding the pressure already felt by the software holdings.

The Takeaway

My perspective on this ETF is no different than last year’s article. It is going to go as far as its popular tech stocks take it. That may sound obvious, but the point is this: IVES is a fund that has reached roughly $1 billion under management despite providing minimal evidence that its stock selection is likely to produce significant alpha over a sustained period of time. 

That’s not on Dan Ives or his team specifically. It is a fact of life in modern markets. Mass assets have crowded into the same trade, and the self-fulfilling prophecy gets more apparent every day. The Nasdaq QQQ Invesco ETF (QQQ) is overweighted to these giants by rule. 

Other ETFs that come along insinuating that they can do better than that over time have a big hurdle to jump. They need to show that they are not just “high R-Squared” funds, which are only as good as the bull market. 

Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob's written research, check out ETFYourself.com.