Investment Divergence in the AI Boom: Why High-Yield ETFs Are the Safe Haven Choice for Smart Money

Recently, the Taiwan stock market hit a new high, surpassing the 28,400-point mark. However, behind this rally, a thought-provoking phenomenon is quietly unfolding—funds are not continuing to chase AI technology stocks as expected, but instead are flooding into high-yield ETF products. This “ice and fire” flow of funds reflects a subtle shift in investor sentiment.

From the US ETF Competition, Revealing the True Dilemma of AI Investment

To understand the essence of this phenomenon, let’s first look at a “quality battle” currently playing out in the US market.

iShares MSCI USA Quality Factor (QUAL) and Invesco S&P 500 Quality (SPHQ) are both ETFs investing in high-quality companies on the surface, but their stock selection logic is vastly different. The key divergence lies in how they define “cash profitability.”

SPHQ uses a seemingly cold but highly pragmatic indicator—the proportion of accrued items. Simply put, it looks not at the company’s book profits but at “how much cash the company has actually received.” This has led the ETF to gradually reduce holdings in AI giants like NVIDIA, Meta, and Microsoft this year, with a very realistic reason: these companies have seen a surge in accounts receivable.

For example, NVIDIA’s latest financial report shows a sudden increase of $16 billion in accounts receivable. What does this mean? It indicates that companies must advance large sums to maintain sales growth, waiting for customers to pay, effectively “locking” cash flow. In this situation, high profits on paper may just be “paper prosperity.”

In contrast, QUAL does not adopt this strict indicator and continues to hold large positions in tech stocks. As a result, the performance gap between the two ETFs is significant: over the past six months, QUAL, which has been heavily invested in tech stocks, has significantly outperformed due to the AI wave, while the more cautious SPHQ has performed relatively flat.

This debate hits at the core anxiety of current AI investments: tech giants spend billions chasing the AI trend—is this the future’s gold mine or an endless cash flow pit?

A Different Logic for High-Yield ETF Choices in Taiwan Stocks

Taiwan stock investors are clearly also contemplating this issue. The most illustrative example is the top ten passive Taiwan stock ETFs by average daily trading volume over the past month—half of them are high-yield products, including Quam Taiwan Select High Dividend (00919), Cathay Forever High Dividend (00878), Fubon Select High Dividend 30 (00900), Yuanta High Dividend (0056), and Yuanta Taiwan Value High Dividend (00940).

This is no coincidence. It reflects investors’ rational choices at market highs: rather than blindly chasing prices, they prefer to allocate assets with “downside protection.”

Take 00919 as an example. This ETF has risen 2.33% in recent months, far outperforming the market, with an estimated annualized dividend yield stable above 10% for 11 consecutive quarters. Its latest quarterly dividend remains at NT$0.54, with ex-dividend on December 16. This stable cash return is the core attraction that draws funds in during high volatility.

Manager Xie Mingzhi’s analysis reveals the wisdom behind such ETFs’ stock selection: as the stock market has reached high levels, some funds are shifting from overgrown AI tech stocks to value companies with reasonable valuations, solid operations, and stable dividends—especially financial stocks.

Why focus on financial stocks? Because in a declining interest rate environment, financial institutions still have room for profit growth, and their dividend payout potential remains stable. This “growth stock plus value stock” allocation allows investors to pursue income while also capturing price differences during market rotations. This is precisely why high-yield ETFs can stand out amid the AI frenzy—they do not abandon growth but prioritize certainty.

The Consensus of Smart Funds: Certainty Over Imagination

The views of international investment masters further confirm this logic.

BlackRock’s chief investment strategist Wei Li straightforwardly states that the current uncertainty brought by AI is too high, and the “spend first, then expect future income” model has yet to prove profitability. In such an environment, many top-tier funds are adjusting their strategies—rather than chasing endless AI imagination, they prefer to hold high-certainty, cash-flowing quality companies.

Dimensional Fund Advisors’ research director Mamdouh Medhat puts it more plainly: quality investing doesn’t have to be complicated—just focus on a few key features—strong profitability, relatively reasonable valuation, and not overly inflated capital expenditures. Over the long term, such choices naturally generate excess returns.

Conclusion

As the Taiwan stock market hits new highs and the global AI boom surges, the choices of funds often reveal more than market hype. The active trading in high-yield ETFs is not just a passing trend but a rational decision in a highly uncertain environment.

Whether it’s the US market’s redefinition of “quality stocks” or Taiwan investors’ preference for income, they point to the same investment logic: in an era of high uncertainty, companies with strong financial health, stable cash flow, and a willingness to continuously reward shareholders are the true foundation of long-term investment.

For investors, rather than obsessing over whether to heavily bet on AI dreams, it might be wiser to allocate a basket of high-yield quality stocks—participating in market growth while effectively reducing volatility risk. This asset allocation approach that balances growth potential with income protection may well be the smarter choice at present.