Pacer ETFs has entered the rapidly expanding market for artificial intelligence-themed exchange-traded funds, unveiling two new products that rely on machine learning to identify equities with the highest expected excess returns. The Pacer S&P 500 3AI Top 100 ETF (PSAI) and the Pacer S&P World 3AI Top 300 ETF (WDAI) began trading this month, tracking the total return of their respective S&P 3AI indices.
Sean O’Hara, president of Pacer ETF Distributors, said in a statement that the funds offer “a differentiated approach to equity investing” at a time when investors are seeking returns beyond traditional beta and static factor strategies. The indices use artificial intelligence and machine learning algorithms to rank companies based on their forecasted excess return potential, then select the top names.
The launch comes as asset managers increasingly blend AI with ETF structures. Wedbush Fund Advisers, for instance, introduced the Dan IVES Wedbush AI Power & Infrastructure ETF (IVEP) in April, which focuses on companies poised to benefit from rising electricity demand tied to AI—including power generation, grid infrastructure, and data center equipment. IVEP has gained more than 9% since its inception. Wedbush’s earlier AI Revolution ETF (IVES), launched in June 2025, has surged over 46%.
The broader AI market is expanding at a breakneck pace. According to Mordor Intelligence, the global AI market is projected to grow from $306.04 trillion in 2025 to $434.42 trillion this year, and to roughly $2.5 quadrillion by 2031. While these figures are staggering, they underscore the immense investor interest that fund providers are trying to capture.
For financial advisors, the proliferation of AI ETFs raises questions about how to evaluate strategies that are themselves opaque. As advisors shift from information gatekeepers to strategic coordinators, understanding the underlying models becomes critical. Pacer’s O’Hara emphasized that the 3AI methodology is transparent in its selection criteria, even if the AI engine is complex.
The convergence of AI and ETFs is not limited to equity selection. Some firms are using AI for portfolio rebalancing, risk management, and even marketing. Meanwhile, the rise of AI-driven funds has also sparked regulatory scrutiny, as the SEC examines whether such products deliver on their promises of superior returns.
Pacer’s move follows a broader trend of ETF issuers launching thematic funds tied to disruptive technologies. The firm, known for its cash-flow and dividend-focused strategies, is now betting that AI can enhance stock picking in both U.S. and global markets. The PSAI fund focuses on the S&P 500 universe, while WDAI covers developed and emerging markets.
As the AI ETF space grows, advisors will need to weigh the potential for outperformance against the risks of model overfitting and sector concentration. With Wedbush’s IVES fund nearly doubling in less than a year, the appetite for such products shows no signs of waning.
