Beyond the "Magnificent 7": How Dan Ives' AI ETF Discovers Hidden Gems in the Revolution

The AI revolution is no longer just about the "Magnificent 7"—the tech giants like Apple, Microsoft, and NVIDIA that dominate headlines and indices. Instead, investors are increasingly turning to Dan Ives' Wedbush AI Revolution ETF (IVES), which has outperformed broader benchmarks by focusing on underappreciated AI-driven stocks. With a 2.76% rise year-to-date, IVES has defied the broader AI sector's struggles, as measured by the S&P Kensho AI Index, which fell 6.08% over the same period. This divergence underscores the ETF's thesis: market valuations are missing transformative AI growth opportunities in overlooked sectors.

The "Magnificent 7" vs. the Undervalued 30

The Magnificent 7—Alphabet, Amazon, Apple, Broadcom, Meta, Microsoft, and NVIDIA—command nearly 33% of IVES' portfolio. Yet the ETF's secret sauce lies in its focus on 30 companies beyond these titans, many of which are undervalued or underappreciated by traditional metrics. This includes enterprise software leaders like Oracle, Palantir, and IBM, which are often overlooked in the AI narrative despite their critical roles.

Oracle: The "Epicenter" of AI Software

Oracle, the ETF's fourth-largest holding, has surged 62% over the past two months, driven by its AI-driven cloud infrastructure and partnerships like its joint venture with OpenAI. Despite a price-to-earnings ratio hitting a 23-year high of 31x forward earnings, Dan Ives argues this valuation is justified. Analysts project Oracle's revenue growth to leap to 16% in fiscal 2026, up from 8.4% in fiscal 2025, as it embeds AI into its core offerings.

Oracle's stock rise reflects investor confidence in its AI-fueled growth.

Palantir: AI's "Launchpad" in Enterprise Software

Palantir, a software-focused holding, has soared 47% in two months, benefiting from its AI-driven enterprise tools. While not traditionally labeled an AI stock, Palantir's data integration and decision-making platforms are "transformative," per Ives. Its inclusion in IVES highlights the ETF's strategy of identifying undervalued companies with niche AI applications, such as government and cybersecurity solutions.

IBM: Reborn Through AI and Quantum Computing

IBM's stock has climbed 28% in 2025, with Wedbush analysts raising its price target to $325. IBM's underappreciated AI capabilities, such as its WatsonX platform and hybrid cloud infrastructure, are now central to enterprise workflows. Additionally, its advancements in quantum computing—like the Quantum Nighthawk chip—position it for long-term leadership.

IBM's resurgence underscores its AI-driven renaissance.

Why IVES Outperforms: A Focus on Undervalued Innovation

IVES' success stems from its conviction-driven, non-diversified structure, which allows it to overweight companies like these while avoiding overhyped sectors. For instance, it excludes chip equipment manufacturers (e.g., ASML) in favor of software and enterprise plays. The ETF's dynamic quarterly rebalancing ensures it stays aligned with emerging AI trends, unlike static indices.

Risks and Considerations

Critics argue that high valuations (e.g., Oracle's P/E ratio) or execution risks could temper growth. However, Ives counters that transformative tech stocks often trade at premiums early in their AI adoption phases. For example, NVIDIA's 1,410% five-year return proves that underappreciated AI leaders can defy short-term skepticism.

Investment Implications: A Strategic Shift

Investors seeking AI exposure should consider IVES for its diversified, forward-looking approach. While the Magnificent 7 remain critical, their dominance has led to overvaluation risks. By contrast, IVES' focus on under-the-radar innovators like Oracle, Palantir, and IBM offers a hedge against sector volatility.

With an expense ratio of 0.75%—competitive for active management—and $183 million in assets, IVES is poised to capitalize on the AI revolution's "golden age." As Ives notes, "valuation alone doesn't capture the AI renaissance. The winners will be those who see the software-driven future first."

Final Take: Embrace the Undervalued

The S&P Kensho's 6.08% decline highlights the perils of relying solely on broad indices. IVES' 2.76% rise signals a strategic shift: investors must look beyond the "Magnificent 7" to uncover AI's hidden gems. For now, the ETF's focus on undervalued enterprise software and AI-driven innovation makes it a compelling choice for tech investors seeking both growth and diversification.

IVES' outperformance underscores the value of underappreciated AI plays.

Investment Recommendation: Consider a position in IVES for investors willing to overweight under-the-radar AI innovators. Pair it with selective exposure to the Magnificent 7 for a balanced portfolio.

This article is for informational purposes only. Always conduct thorough research or consult a financial advisor before making investment decisions.