Thematic ETFs took center stage in the U.S. ETF market over the past few years, but 2024 was a stark reminder that not all themes have staying power.
As investors recalibrated amid interest rate uncertainty, macroeconomic resets, and headline fatigue, some of the buzziest ideas of the past cycle saw significant outflows.
Meanwhile, a more selective class of strategies emerged as winners, revealing an important shift in how U.S. investors are approaching thematic exposure.
According to Morningstar and Bloomberg Intelligence data, net flows into U.S.-listed thematic ETFs declined in 2024 compared to prior years, with crypto, artificial intelligence, infrastructure, and nuclear energy absorbing the bulk of new assets. Several other themes, including ESG-aligned innovation, genomics, and Web3, experienced redemptions, fund closures, or consolidation.
From Hype to Conviction
Thematic investing, by design, leans into narrative and forward-looking conviction. But in a post-zero-rate environment, investor sentiment is shifting toward themes with tangible business fundamentals and policy tailwinds.
Take artificial intelligence: while valuations remain high, institutional interest surged in Q4 2024 after several major chipmakers and enterprise AI vendors beat earnings expectations. U.S.-listed ETFs tracking AI and machine learning captured more than $8.5 billion in net inflows, according to etf.com data.
Similarly, funds targeting global infrastructure and nuclear energy, two themes long linked to industrial policy and national security, saw steady inflows. These strategies benefited from bipartisan U.S. legislation tied to energy independence and semiconductor supply chains.
Meanwhile, climate, mobility, and blockchain ETFs struggled to retain flows, with some losing more than 50% of their 2021–2022 AUM peaks. Several high-profile thematic issuers closed or merged funds in 2024, citing a lack of sustained interest and difficulty scaling niche exposures.
Thematic ETFs Are Getting Smarter
Despite the shakeout, U.S. ETF issuers aren’t abandoning thematic plays, they’re just refining them.
New launches in 2025 have focused on modular themes that cut across sectors and styles. ETFs targeting “AI in Healthcare” or “Defense Tech” are combining broader narratives with tighter index construction and risk controls.
Another trend: greater use of industry-leading index partners.
Rather than building homegrown indices around loose narratives, issuers are partnering with firms like S&P Dow Jones, MSCI, and Nasdaq to structure themes based on sector exposure, patent filings, or fundamental screens. This shift improves transparency and performance attribution, making thematic products easier for advisors to understand and justify.
Advisors are also demanding more from thematic issuers. With the flood of launches over the last five years, shelf space has become competitive.
Tidal’s Role in Thematic ETF Design
As the thematic landscape matures, platforms like Tidal Financial Group are helping asset managers rethink how thematic ETFs are built and sold.
Tidal’s white-label and full-service model allows managers to quickly develop thematic ideas backed by robust operational, compliance, and capital markets infrastructure.
But it’s the strategic layer that increasingly stands out.
Tidal’s product team works with managers to validate demand signals, stress-test index construction, and partner with institutional index providers with the aim of ensuring that products are differentiated and durable.
In an industry where fewer than 30% of thematic ETFs launched in 2021 still trade above their AUM break-even points, these pre-launch safeguards are becoming mission critical.
The Outlook
The golden era of “ticker first, narrative later” is over. In its place there is a more sober, focused era of thematic investing. One driven by data, use case, and alignment with broader macro forces.
That doesn’t mean the category is going away. In fact, thematic ETFs remain one of the most effective tools for capturing investor attention and building differentiated product lines.
But to succeed in 2025 and beyond, themes must evolve.
