AI & Robotics Selloff Creates Disconnect Between Valuations & Fundamentals
The more useful lens here is not the selloff itself, but what these ETFs are actually buying: a rules-based slice of the AI and robotics value chain, not just the familiar megacap data-center narrative. That matters because index additions such as chip designers, edge-computing suppliers and industrial automation firms can broaden exposure beyond one crowded theme and reduce dependence on a single end market.
For investors, the central portfolio question is concentration. Even diversified thematic ETFs can become implicitly concentrated in a handful of technologies, regions or supply-chain beneficiaries when the underlying index favors specific revenue links to automation and AI. That can be a feature when the theme is broadening, but it also means valuation resets can hit multiple holdings at once if sentiment turns against the sector.
Fees, trading costs and tracking matter more in thematic products than many buyers assume. A small expense ratio difference can be less important than the combination of bid-ask spreads, rebalancing turnover and the possibility that index changes lag fast-moving fundamentals. In thinner markets, that can affect long-term entry and exit outcomes, especially when the theme is in and out of favor.
Bottom line: the article argues that fundamentals are improving even as prices weaken, but ETF holders should still think in terms of exposure design, not just conviction in the theme. For long-term allocators, the practical questions are whether the strategy remains sufficiently diversified, how it behaves through drawdowns, and whether it fits as a satellite allocation rather than a core holding.
Key Takeaways
- Celestica doubled its 2027 revenue outlook to approximately $40 billion. Despite the gain, shares fell amid investor jitters that the trade is ending.
- U.S. factory construction continues at a $200 billion annual run rate compared to its historical $70 billion baseline, with PMI expanding for nine straight months.
- Targeted strategies tracking specialized benchmarks, including the ROBO Global Robotics and Automation Index ETF (ROBO) and the ROBO Global Artificial Intelligence ETF (THNQ), are capturing edge technology and manufacturing growth.
Underlying Business Momentum Defies Market Skepticism
Celestica (CLS) exemplifies this paradox where companies raise production forecasts even as markets sell them off, according to Zeno Mercer, head of AI and robotics research at VettaFi. The company, which manufactures networking equipment for data centers, recently raised its 2027 revenue outlook to approximately $40 billion. Despite effectively doubling expectations, its stock declined amid broad investor nerves that the trade is ending. The disconnect extends beyond data center plays. Phonic (TPE:3067) reported record-high orders and sales, yet its stock fell. โThereโre a lot of things that donโt really make sense right now,โ Mercer noted, pointing out that manufacturing demand is climbing across the globe. For the past several years, factory construction in the U.S. has sat at a $200 billion annual run rate versus a historical $70 billion baseline, according to Mercer. Additionally, machinery orders and industrial equipment investment hit all-time highs, and PMI has expanded for nine consecutive months. Recent industrial data reinforces this momentum: North American robot orders climbed 24.8% year over year in the third quarter of 2026 to 10,989 units valued at $723.5 million, according to the Association for Advancing Automation (A3). The surge marks the strongest quarter of the year, led by semiconductor, electronics, and automotive component suppliers accelerating their automation adoption.Index Additions Expand Beyond Data Centers
This disconnect creates opportunities within dedicated investment strategies such as the ROBO Global Robotics and Automation Index ETF (ROBO), which tracks the ROBO Global Robotics and Automation Index, and the ROBO Global Artificial Intelligence ETF (THNQ), which tracks the ROBO Global Artificial Intelligence Index. Both indices continue to add companies that provide critical exposure across the entire technology stack. New additions to the index underlying ROBO include Global UniChip (TPE:3443), a design partner to Taiwan Semiconductor Manufacturing (TSM). The company provides exposure up and down the stack, extending beyond hyperscalers into broader robotics and AI applications. Meanwhile, the index underlying THNQ recently added Ambiq Micro (AMBQ), an edge-technology provider whose chips run at sub-power thresholds โ operating at two and a half times lower power than competitors. Ambic Micro enables low-power AI, data collection, and extended battery life for wearable products like Garmin, Fitbit, and Whoop, while expanding into industrial lightweight edge systems and long-duration medical devices. Mercer emphasized that many AI and robotics names have no direct tie to data centers and instead benefit from open-source tools and cheaper energy. With valuations for robotics and AI trading at a discount compared to earlier in the year, Mercer said price discovery should eventually normalize valuations upward.Enjoyed this article? Sign up for our newsletter to receive regular insights and stay connected.