Value ETFs up 47%, beating growth as AI trade shifts

Value stocks are significantly outperforming growth this year, with the Russell 1000 Value Index returning roughly 23% year to date versus about 4% for the Russell 1000 Growth Index. The iShares MSCI USA Value Factor ETF (VLUE) has surged more than 47% year to date. Some investors favored attractively valued stocks to reduce mega-cap concentration amid heightened market volatility, but value stocks have also benefited significantly from the AI trade.

While investors traditionally look to growth and tech funds for AI exposure, value ETFs have increasingly become direct and indirect beneficiaries of the AI investment cycle. Multiples for some AI tech giants have compressed as earnings accelerated, allowing legacy tech leaders to be picked up by value screens. Industrials, utilities, and materials have also benefited from rising AI spending. VLUE tracks the MSCI USA Enhanced Value Index, with Micron about a 22% weight and information technology roughly 41% of the portfolio. IWD's index added Amazon, Apple, and Microsoft as top holdings at its late June rebalance, with IT about 20%. VTV's top holdings include JPMorgan Chase, Micron, and Berkshire Hathaway.

The performance gap between value and growth this year may hinge on whether AI-driven earnings continue to accelerate for legacy tech names and whether rising AI spending keeps lifting industrial, utility, and material stocks. For investors seeking AI exposure without concentrated mega-cap bets, value ETFs could remain a notable option, though their AI tilt depends on continued earnings momentum.