ARK Invest Europe, a global leader in thematic investing and disruptive innovation, has published its quarterly thematic update detailing Q1 2025 European Thematic ETF Flows.
Using data from ETF Book and based on ARK Invest Europe Megatrend Sub Theme Classification, Defence ETFs saw the most net inflows of $4.184 billion, representing 72 per cent of the total net inflows ($5.776bn) to European ETFs in the first quarter of 2025. Investor positioning in defence remains robust. The demand for next-gen military and aerospace technology continues to attract capital, with defence-tech firms benefiting from increased procurement budgets globally.
Artificial Intelligence ETFs rank second with $678 million in net inflows. AI remains the defining technological revolution, with investor appetite fuelled by relentless innovation in large language models, robotics, and autonomous systems. Meanwhile, Clean Energy ETFs posted the weakest Q1 2025 net flows, with a loss of $227 million. Capital continues to exit clean energy ETFs as investors adjust to a new global policy landscape. Investors are redirecting capital toward solutions like nuclear energy, grid modernisation, and energy efficiency, which are less dependent on policy incentives.
EV and Battery Tech ETFs recorded the second-worst net flows at -$136 million. Near-term headwinds—ranging from subsidy rollbacks to a cooling demand environment—have weighed on sentiment.
Commenting on the flows, Rahul Bhushan, Managing Director at ARK Invest Europe, says: “Given the not insignificant geo-political and economic shifts in the first part of this year, it is not surprising to see investors cooling off on certain themes, such as EVs and Battery Tech with a significant shift to Defence, AI and Cybersecurity. As ever, it is clear now that the only constant is uncertainty, so it will not surprise us if the next quarter sees further remarkable shifts.”
