Mid-Cap ETF XMMO Up 12% YTD as AI Infrastructure Plays Outpace Nvidia

The Invesco S&P MidCap Momentum ETF (XMMO) has emerged as a quiet outperformer in the AI investment landscape, gaining more than 12% year to date while many investors focus exclusively on mega-cap technology stocks. The fund's success reflects growing investor appetite for mid-cap "picks-and-shovels" companies—the suppliers of equipment, infrastructure, and components that enable the AI data center buildout.

XMMO's approach differs fundamentally from traditional index funds. Rather than weighting holdings primarily by company size, it tracks approximately 80 mid-cap companies selected from the S&P MidCap 400 Index that exhibit the strongest relative price momentum. This methodology is designed to evolve alongside changing market leadership, systematically increasing exposure to businesses with improving investor sentiment while removing those whose momentum weakens. The result is a portfolio naturally weighted toward companies benefiting from current investment trends.

The fund's holdings illustrate the breadth of the AI infrastructure ecosystem. Sterling Infrastructure, an engineering and construction firm supporting data centers and large-scale infrastructure projects, has gained 162.56% on a total return basis over the past year. MKS Inc., which supplies critical semiconductor manufacturing equipment and photonics technologies for advanced chip production, has posted an even more striking gain of 215.48%. Other notable holdings include Fabrinet, a manufacturer of optical networking equipment for AI data centers; MACOM Technology Solutions, which develops high-performance networking and radio-frequency semiconductors; and TTM Technologies, a leading producer of advanced printed circuit boards used in AI servers and networking hardware.

A key distinction is that XMMO is not purely a technology fund. While technology makes up 14% of holdings, industrials account for approximately 40% of the portfolio. This diversification reflects a crucial investment reality: as hyperscalers and enterprises expand their AI capabilities, capital spending flows beyond chip designers into the manufacturers supplying semiconductor equipment, electrical infrastructure, and specialized industrial components. The fund's 0.61% expense ratio and historical earnings growth of 8.63% position it as a cost-effective way to access this broader AI infrastructure trend. Going forward, investors are encouraged to monitor hyperscaler capital spending and the fund's quarterly holdings updates to gain insight into where the next phase of AI infrastructure investment may emerge.

XMMO's outperformance reflects a structural shift in how investors are accessing AI growth beyond the familiar mega-cap chip designers. While Nvidia and other trillion-dollar technology companies dominate headlines, the real capital flow in AI infrastructure deployment benefits a wider ecosystem of mid-cap manufacturers and builders. The fund's holdings—companies supplying semiconductor equipment, data center construction, networking hardware, and advanced components—directly enable the physical infrastructure that hyperscalers are rapidly deploying.

What distinguishes XMMO from traditional mid-cap index funds is its momentum-based selection process. By holding only the approximately 80 companies exhibiting the strongest price momentum within the S&P MidCap 400, the fund naturally gravitates toward businesses with improving fundamentals and rising investor demand, while mechanically rotating out names as momentum weakens. This rules-based approach removes the need for investors to forecast which companies will emerge as winners; instead, the methodology adapts as leadership shifts across the AI ecosystem.

The portfolio's composition—40% industrials and 14% technology—underscores that AI infrastructure investment is not purely a semiconductor or tech story. Companies building physical data centers, electrical systems, and specialized manufacturing equipment benefit from the same wave of capital spending driving chip production. As hyperscalers and enterprises expand AI capabilities, investment flows increasingly toward the suppliers of equipment and infrastructure rather than concentrating solely on chip designers.