The world’s largest asset manager is adding to bets on the artificial intelligence within its U.S. model portfolios while trimming its overall equity risk because of tariff uncertainty.
BlackRock Inc. is increasing exposure to AI within its equity-heavy portfolios through the iShares AI Innovation and Tech Active ETF (ticker BAI). The actively managed fund quadrupled in size after it took in roughly $436 million on Tuesday, the largest one-day net inflows since its inception last October.
BlackRock’s shift underscores how institutional asset managers are reluctant to max out their exposures across the broad stock market, opting instead to lean into the biggest winners of this tech-driven era.
BAI has large positions in Nvidia Corp., Broadcom Inc., and Meta Platforms Inc., and has risen 29% over the last month as risk assets rebounded from tariff-driven lows.
“Tech remains one of our highest conviction and longest running portfolio overweights, and within tech AI is the highest conviction drivers,” Michael Gates, lead portfolio manager for BlackRock’s $160 billion Target Allocation ETF model portfolio suite, wrote in a memo.
While the AI-trade is exposed to tariff headlines and some investors have flagged valuation concerns, some analysts are optimistic on the earnings outlook for artificial-intelligence-linked sectors for the remainder of the year.
BlackRock is also paring its equity exposure across its U.S. models after the recent risk-on rally. The asset manager is trimming its overweight on stocks relative to bonds to 1% from 3%, reducing an overweight allocation to growth stocks and adding value stocks outside of the U.S.
Gates said the moves are a response to the uncertainty around trade negotiations and are “not a reflection of diminished confidence in U.S. exceptionalism.”
“In our view, the more significant concern around tariffs lies in their potential to modestly weigh on global growth, as supply chains may take time to adapt and business confidence remains sensitive to evolving trade dynamics,” he added.
The iShares Core S&P 500 ETF (IVV) shed $6.28 billion on Tuesday, the biggest one-day decrease since March, while about $822 million left the iShares S&P 500 Growth ETF (IVW). Meanwhile, the iShares MSCI EAFE Value ETF (EFV) took in a net $912 million, the largest inflow since September.
Within its equity-heavy portfolios, it also added to the iShares U.S. Thematic Rotation Active ETF (THRO), which garnered more than $3 billion on Tuesday, the biggest-one day flow ever.
In fixed-income, the iShares 0-5 Year Tips Bond ETF (STIP) took in a net $553 million, its biggest inflow since 2022.
Model portfolios package together funds into ready-made strategies to sell to financial advisers and institutions. Broadridge Financial Solutions estimates that model assets could reach $11 trillion by 2028, with ETFs seen as a key driver of that growth.
(Credit: AP)
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