VettaFi's Murphy Talks ETF Strategies & AI Bottlenecks on Bloomberg

VettaFi’s Murphy Talks ETF Strategies & AI Bottlenecks on Bloomberg

The ETF market is seeing a record-breaking year in 2026, with significant year-over-year gains in flows, volume, and new product launches. As forward earnings growth broadens beyond the Mag 7 to the rest of the S&P 500 constituents, equal-weighted strategies have begun to outperform, offering a compelling alternative to concentrated portfolios. Investors are increasingly targeting specific bottleneck constraints within the AI sector, such as memory components. Photonics technology is also emerging as the next potential bottleneck and investment theme.

The broader ETF market is set to break records in terms of flows, volume, and launches in 2026. That is if the market progresses by more than 30% this year, according to Bloomberg analysis. Murphy explained that the ETF market growth in 2026 is due to a confluence of factors that have reinforced momentum in the broader market. “We have a market that continues to defy gravity. You know, the more we talk about concerns about valuation, concerns about concentration, the more we buy some of the leaders,” said Murphy. “Anytime they reset, we buy more of the dip, so it’s really a market that keeps on going. I think it keeps feeding this momentum, and momentum is great not only for product innovation where more asset managers want to come into the game, it leads to more trading where folks are looking for more opportunities. So it just keeps going,” she added.

While concentrated strategies are effective when there is narrow market leadership, Murphy explained that equal-weighted strategies have delivered this year as forward earnings growth continues to broaden across S&P 500 constituents outside of the Mag 7. “Equal weighting doesn’t work well when you have a really narrow market leadership, as we know. So now with the broadening of the performance with the earnings. [we’re] really talking a lot about the 493 as we call them and the earnings growth being stronger in the 493 than it is in the Mag 7 going forward,” said Murphy. “So there is a potential for equal weight to really make an impression here. It's outperforming this year, but as we know the moment it goes to narrow leadership, we all kind of forget about equal weightings,” she noted.

Murphy highlights funds such as the Invesco S&P 500 Equal Weight ETF (RSP) and the Invesco QQQ Equal Weight ETF (QEW) for their equally weighted exposure to the traditionally market-cap-weighted S&P 500 and Nasdaq 100. RSP has seen record inflows in 2026, gaining $12.46 billion in new assets year to date. Meanwhile, QEW has seen inflows of $8.83 million since its launch in March. The Alps Equal Sector Weight ETF (EQL) also utilizes an equal-weight strategy by tracking the VettaFi Modelist Equal Weight Sector 500 Index. The index provides equal-weight exposure to each sector of the economy. This offers more balanced exposure to S&P 500 companies with the added benefit of avoiding the potentially adverse impact of rallies or drawdowns in specific sectors of the economy. EQL has received inflows of $116.18 million in 2026.

When discussing the Roundhill Memory ETF (DRAM), which is widely regarded as the most successful ETF launch of 2026, now sitting at approximately $26.9 billion in assets, Murphy explained that its performance is the result of a memory component bottleneck within the AI sector. She noted that bottlenecks make powerful investment themes and pointed to photonics as the next potential bottleneck in the AI narrative. “I think the next coming up is photonics,” Murphy noted. “Which is carrying data through lig...