AI Capex Shifts Drive 18% Value ETF Outperformance Over Growth
Over the past three months, iShares Russell 1000 Growth ETF has underperformed its value counterpart by 18 percentage points as AI capital expenditure boosts utilities, power grids and industrial assets. Goldman Sachs research notes that AI infrastructure spending is broadening equity returns beyond mega-cap growth stocks.
1. Performance Gap Between Growth and Value ETFs
The iShares Russell 1000 Growth ETF (IWF) has lagged the Russell 1000 Value ETF by 18 percentage points over the past three months, marking a sharp break from its decade-long outperformance. This reversal highlights a shifting market narrative as investors reallocate capital toward previously neglected sectors.
2. AI Infrastructure Spending Redirects Capital
Hyperscalers’ surge in AI capital expenditure is extending far beyond data centers into power plants, transmission lines, industrial equipment and construction projects. These physical asset investments, starved of capital since the 2008 financial crisis, are now drawing significant funding, driving returns in ‘old economy’ sectors.
3. Implications for IWF Investors
With AI-driven capex broadening the drivers of equity returns, growth ETF investors may encounter slower margin expansion in software and mega-caps. At the same time, industries tied to utilities and industrial capacity could offer more stable cash flows and higher shareholder returns through dividends and buybacks.