Unlocking the Full Potential of the AI Supercycle™

Artificial intelligence (AI) is one of today’s most interesting investment themes with a significant runway for growth. That’s why we designate AI as one of our Supercycles™—long-term trends that can last decades, disrupting current economic models through technological advancement.

We believe most exchange-traded funds (ETFs) in the market focused on AI, though, don’t provide investors with the Pure Exposure™ to truly capture the potential impact of machine learning and related technologies across sectors. Their shortcomings can include:

• Providing exposure to mostly large, well-known technology stocks
• Introducing concentration risk and potential underperformance if the largest stocks lag
• Ignoring the supply chain and full ecosystem of companies driving the AI Supercycle™

For example, most indices claiming to track “AI” rely on the same handful of well-known mega-cap core holdings such as chip companies like Nvidia (NVDA) and Advanced Micro Devices (AMD), and consumer-facing companies such as Meta Platforms (META) and Alphabet (GOOGL). Consider the top index holdings within a popular passively managed AI Index:

Top Five Holdings:

Ticker	Company	% of Portfolio
META	Meta Platforms	8.78
GOOGL	Alphabet	7.92
AMD	Advanced Micro Devices	7.89
NVDA	Nvidia	7.82
ADBE	Adobe	5.98

Although these are clearly great companies, we think investors should dig much deeper to truly participate in the AI theme. In other words, it’s not so simple.

According to industry reports, semiconductors can represent around 10-15% of the overall data center capital expenditures.¹

“When building data centers for AI training or inference, you need more than just semiconductors,” says Sunny Madra, President of Supply Chain, Operations and Go-to-Market at Groq, and Advisor to the Investment Committee at VistaShares ETFs. “You need memory, cooling systems, energy infrastructure, and maintenance. That’s the lens we’re applying to our AI ETF. It’s not about performance-chasing or just large-cap growth names; it’s about capturing the entire supply chain.”

¹Sources: Allied Market Research, Data Center Chip Market Size, Share, Competitive Landscape and Trend Analysis Report. Dell’Oro, Market Research Reports on Data Center IT Semiconductors & Components.

Harnessing AI’s True Potential

AI is reshaping industries and driving a significant shift in global investment patterns. While still in its early stages, AI is already revolutionizing productivity and creating new business opportunities. Over the past few years, billions of dollars have shifted from traditional software as a service (SaaS) businesses to AI-focused enterprises, signaling confidence in the long-term growth prospects of AI technologies.²

Source: Coatue 2024 EMW Conference. The Bloomberg Semiconductor Index. The Bloomberg Cloud Computing Index.

The most immediate impact has been related to the demand for semiconductors, which provide essential computing power for AI. In 2023, AI-driven semiconductor revenue reached $53 billion, with growth expected to more than double by 2027.² This rising demand has been primarily fueled by the development of computationally intensive systems like large language models (LLMs), which require significant processing power to develop and operate.³

At the same time, the infrastructure supporting AI is booming. Vacancy rates for data centers are at all-time lows, leading to a 20–30% year-over-year increase in asking prices in major U.S. markets.⁴ To meet this growing demand, data center construction has accelerated, providing further opportunities for investment in the broader AI ecosystem.²

While many investors may have already grown weary of the hyperbolic headlines, the economic reality is that we’re still in the very early innings of the AI revolution, and smart, patient investors have the chance to capitalize on this transformative technology as it matures. With AI adoption driving advancements in sectors from healthcare to finance, and significant investments being made in data infrastructure, AI’s potential for growth is immense. The window to invest in AI is now, while the sector is poised for exponential expansion.

“When the Internet came along, it improved connectivity and productivity, but not in a way that transformed things as machinery did for farming,” says Madra. “Now, with AI, we’re seeing the first true industrialization of technology. For example, what used to take a designer a week to do can now be done in seconds with AI tools. There are examples of kids writing sophisticated code, which reflects the same kind of industrial leap that we’ve seen before in history.”

²Source: McKinsey & Company, The State of AI in 2023: Generative AI’s Breakout Year.
³Source: International Data Corporation (IDC), Semiconductor Industry Revenue Growth 2023.
⁴Source: CBRE, U.S. Data Center Trends Q2 2023 Report.

Introducing VistaShares Supercycle™ ETFs

We will soon be launching an ETF designed to provide investors and financial professionals with Pure Exposure™ to the AI secular trend using VistaShares ETFs’ patent pending process. VistaShares ETFs is leveraging the visionary leadership of top industry executives who have helped shape the AI industry and will in turn be applying that knowledge to help shape an investment strategy that we view as more accurate in capturing the growth potential of this Supercycle™.

VistaShares AI Supercycle™ ETF (AIS) is designed to provide exposure to profit pools within the AI and data center supply chain, not just consumer facing applications.

Led by industry veterans, VistaShares ETFs leverages decades of experience in portfolio construction and strategic investment. Our team blends academic rigor with real-world insights, tapping into the expertise of top scholars, seasoned investors, and industry trailblazers. This unique combination empowers us to deliver tailored investment strategies designed to drive performance and long-term success.

Learn more about VistaShares ETFs at www.VistaShares.com.

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AIS is effective but not yet available for trading.
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call (844) 875-2288 or visit www.vistashares.com. Read the prospectus or summary prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

Artificial Intelligence Risk (AIS). Issuers engaged in artificial intelligence typically have high research and capital expenditures and, as a result, their profitability can vary widely, if they are profitable at all. The space in which they are engaged is highly competitive and issuers’ products and services may become obsolete very quickly. These companies are heavily dependent on intellectual property rights and may be adversely affected by loss or impairment of those rights. The issuers are also subject to legal, regulatory and political changes that may have a large impact on their profitability. A failure in an issuer’s product or even questions about the safety of the product could be devastating to the issuer, especially if it is the marquee product of the issuer. It can be difficult to accurately capture what qualifies as an artificial intelligence company.

Equity Market Risk (AIS). Common stocks are generally exposed to greater risk than other types of securities, such as preferred stock and debt obligations, because common stockholders generally have inferior rights to receive payment from specific issuers.  

Technology Sector Risks (AIS). The Funds will invest substantially in companies in the technology sector, and therefore the performance of the Funds could be negatively impacted by events affecting this sector. Market or economic factors impacting technology companies and companies that rely heavily on technological advances could have a significant effect on the value of the Funds’ investments.  
Foreign Securities Risk (AIS). Investments in securities or other instruments of non-U.S. issuers involve certain risks not involved in domestic investments and may experience more rapid and extreme changes in value than investments in securities of U.S. companies. Financial markets in foreign countries often are not as developed, efficient, or liquid as financial markets in the United States, and therefore, the prices of non-U.S. securities and instruments can be more volatile.

Index Strategy Risk (AIS). The Funds’ strategy is linked to an Index maintained by the Index Provider that exercises complete control over the Index. The Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. In addition, there is no guarantee that the methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. Errors in Index data, Index computations or the construction of the Index in accordance with its methodology may occur from time to time and may not be identified and/or corrected for a period of time or at all, which may have an adverse impact on the Fund.

New Fund Risk (AIS). The Fund is a recently organized management investment company with no operating history. As a result, prospective investors do not have an extensive track record or history on which to base their investment decisions.

New Sub-Adviser Risk (AIS). The Sub-Adviser is a newly formed entity and has no experience with managing an exchange-traded fund, which may limit the Sub-Adviser’s effectiveness.

The Sub-Adviser defines an “AI company” as a company that, based upon publicly available revenue data derives at least 50% of their revenues from or have at least 50% of their assets invested in or have the potential to generate 50% of their revenues from or have at least 50% of their assets devoted to the production, development and/or operation of (i) high-performance semiconductors used for AI (artificial intelligence) related hardware & software, (ii) AI related datacenters, and/or (iii) AI enabled applications.
The Sub-Adviser defines “supercycles” as long-term trends that disrupt current economic models through disruptive technological advancements shaping our world. The Fund’s portfolio is expected to consist of all or a representative sample of the securities in the BITA VistaShares Artificial Intelligence Supercycle Index (the “Index”).

The BITA VistaShares Artificial Intelligence Supercycle Index is a rules-based composite index that tracks the market performance of companies, listed on global stock exchanges, that derive their revenues from producing high-performance semiconductors, and building and operating AI-enabled applications and datacenters.

The Bloomberg Semiconductor Index tracks the performance of semiconductor-related companies. The Bloomberg Cloud Computing Index (BLOOMBERG BVP Cloud Index), which tracks the performance of companies in the cloud and SaaS sectors. The performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index.

The STOXX World AC NexGen Software Development Index is comprised of companies with significant exposure to technologies or products that contribute to advancements in software development through direct revenue. These companies, or components of their business lines, are expected to benefit from long-term structural trends driven by technological and societal change, which, in the future, may have a substantial impact on their performance. Revere (RBICS) Revenue datasets allow detailed breakdown of the revenue sources of the eligible companies, helping this index to select companies with substantial exposure to the theme.

Foreside Fund Services, LLC