European Thematic ETFs on Defence and AI Reach Record $8 Billion Inflows in H1 2025
Trackinsight data for the first half of 2025 shows that European thematic ETFs focused on defence and artificial intelligence attracted record net inflows of $8 billion, marking the highest level ever recorded for these sectors. The surge reflects growing investor interest in strategic technologies and security-related industries amid geopolitical tensions and increased public and private spending on defence innovation across Europe.
According to ETF Express, the inflows have been driven by a combination of rising institutional allocations, new product launches, and continued support from regulatory changes allowing pension and sovereign wealth funds to include defence-linked instruments in ESG-compliant portfolios. Market participants also point to the alignment between EU industrial policy and investor demand for exposure to dual-use technologies, especially in light of expanding defence budgets and pan-European procurement initiatives.
This trend positions defence and AI ETFs as key vehicles for capturing the structural shift in Europe's security and technology landscape. Several issuers have expanded their thematic offerings to include sub-segments such as military-grade cybersecurity, autonomous systems, and next-generation industrial platforms. Analysts note that performance in these ETFs has consistently outpaced broader equity indices, reflecting both solid fundamentals and investor appetite for long-term exposure to sectors deemed critical to European strategic autonomy.
The record inflows underscore the growing role of thematic ETFs as instruments of both portfolio diversification and industrial policy alignment. As Europe accelerates investment in key technologies and reconfigures its defence posture, asset managers and investors are likely to continue channeling capital into funds that reflect these priorities. Trackinsight expects the inflow trend to remain strong into the second half of the year, especially with additional ETF listings expected in the third quarter.