Exchange-traded funds (ETFs) are often used as portfolio building blocks, but they can also serve as trading tools. For newer…
Exchange-traded funds (ETFs) are often used as portfolio building blocks, but they can also serve as trading tools. For newer investors, it can help to think of ETFs along a continuum.
At one end are core holdings. These are typically low-cost, broadly diversified funds that track a market benchmark. For example, pairing an S&P 500 index ETF with an MSCI EAFE ETF, which covers Europe, Australasia and the Far East, can provide exposure to most of the global stock market.
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At the other end are highly tactical products. Investors looking to express a very specific view, such as betting on or against a single company, can use leveraged or inverse ETFs tied to individual stocks like Nvidia Corp. (ticker: NVDA), Palantir Technologies Inc. (PLTR) or Tesla Inc. (TSLA). These products often carry higher fees and are generally designed for short-term trading rather than long-term holding.
Between the extremes of broad-market index ETFs and single-stock ETFs sit sector, industry and thematic ETFs, which offer increasing levels of specificity.
Sector ETFs track one of the 11 major stock market sectors: technology, health care, financials, industrials, energy, consumer discretionary, consumer staples, utilities, materials, real estate and communication services. These funds may focus on U.S. markets or include global exposure, and some track only large-cap stocks, while others include mid- and small-cap companies.
Industry ETFs take this a step further by narrowing exposure within a sector. For example, the industrial sector includes aerospace and defense, transportation, machinery, and construction. An investor interested specifically in aerospace and defense may find a broad industrials sector ETF too general, while an industry-specific ETF offers more targeted exposure.
The most specific category is thematic ETFs. These funds are built around a particular idea or trend rather than traditional sector or industry classifications. Examples include niche strategies focused on artificial intelligence, clean energy, cybersecurity or genomics.
“Notable flow-gathering ETF themes include defense (on conflict with Iran), software (reversing the February crack-up on Anthropic news), and semiconductors (major winners of data center buildouts and memory-chip plays),” says Rene Reyna, head of thematic and specialty product ETF strategy at Invesco.
While thematic ETFs have drawn criticism for higher fees and mixed performance, especially when launched during periods of peak investor enthusiasm, they remain a viable way to express a focused, high-conviction view without selecting individual stocks.
Here are seven of the best thematic ETFs to buy today:
| ETF | Expense ratio | Assets under management |
| Global X Defense Tech ETF (SHLD) | 0.50% | $8.4 billion |
| Global X Data Center & Digital Infrastructure ETF (DTCR) | 0.50% | $1.2 billion |
| VanEck Rare Earth and Strategic Metals ETF (REMX) | 0.58% | $2.6 billion |
| VanEck Uranium and Nuclear ETF (NLR) | 0.56% | $4.6 billion |
| VanEck Agribusiness ETF (MOO) | 0.55% | $1.2 billion |
| Invesco Solar ETF (TAN) | 0.70% | $1.5 billion |
| Invesco Water Resources ETF (PHO) | 0.59% | $2.0 billion |
Global X Defense Tech ETF (SHLD)
SHLD has been one of the more successful thematic ETF launches in recent years. Since its debut in September 2023, it has grown to more than $8 billion in assets under management. SHLD’s portfolio is relatively concentrated, holding 49 companies tracked by the proprietary Global X Defense Tech Index. As of April 1, the fund has gained about 57% on a one-year trailing basis.
SHLD’s portfolio also stands out for its global reach. In addition to U.S. holdings, it includes companies based in Europe, South Korea and Israel. There is also exposure beyond hardware and the large U.S. prime defense contractors. The ETF includes firms involved in military intelligence, such as Palantir, along with up-and-coming drone manufacturers like AeroVironment Inc. (AVAV).
Global X Data Center & Digital Infrastructure ETF (DTCR)
The AI buildout is constrained by several bottlenecks. Some relate to semiconductor equipment and fabrication capacity, while others stem from rising electricity demand. Another key constraint is the availability of data centers, which house the physical infrastructure needed to run and store large-scale computing workloads. DTCR provides that exposure with a real estate angle at a 0.5% expense ratio.
While investors can gain indirect exposure through hyperscaler capital spending, a more direct approach is to invest in the landlords that own and operate this infrastructure. DTCR’s basket owns 25 of these companies. Top holdings include Equinix Inc. (EQIX), Digital Realty Trust Inc. (DLR), American Tower Corp. (AMT) and Crown Castle Inc. (CCI). DTCR currently pays a 1.6% 30-day SEC yield.
VanEck Rare Earth and Strategic Metals ETF (REMX)
“REMX targets a segment sitting at the intersection of two of the most powerful macro forces in markets today: the AI infrastructure buildout and the intensifying U.S.-China rivalry over critical supply chains,” says Andrew Musgraves, vice president and senior product manager at VanEck. Year to date as of April 1, REMX is up 19.8%. The ETF currently charges a 0.58% expense ratio.
“Every dollar flowing into defense modernization, AI data centers and next-generation electric vehicles requires rare earth magnets and strategic metals, and the West is only beginning to build alternative supply chains,” Musgraves explains. “With China controlling roughly 80% of global processing capacity, supply security translates into procurement deals, stockpiling initiatives and mining partnerships.”
VanEck Uranium and Nuclear ETF (NLR)
The effective closure of the Strait of Hormuz during the U.S.-Israel conflict with Iran has disrupted a key artery that typically carries around 20% of global oil supply. This has pushed energy scarcity back into focus and made alternatives like nuclear power more attractive as a stable, domestic energy source. NLR covers the full nuclear value chain, from uranium miners to reactor engineers to power generators.
“Data center power demand linked to AI and high-performance computing is projected to at least double to triple between 2025 and 2030, and that demand is for round-the-clock, high-density baseload,” Musgraves explains. “Nuclear is uniquely suited to fill that need: It provides firm, dispatchable power at scale, and hyperscalers have begun securing it directly through long-term power purchase agreements.”
VanEck Agribusiness ETF (MOO)
War tends to bring oil into focus due to supply disruptions and transport chokepoints, but agricultural commodities can also move higher. “The Strait of Hormuz crisis has become a direct stress test for global food security because roughly one-third of global seaborne fertilizer trade passes through the strait, including urea and ammonia that are essential to industrial crop production,” Musgrave explains.
MOO tracks the MVIS Global Agribusiness Index, a benchmark of 58 holdings that supply the inputs, equipment and technology underpinning global food production. “Longer term, the secular forces of tariff friction and climate risk continue to reward the scale operators and input technology providers that dominate the ETF’s holdings,” Musgraves says. MOO charges a 0.55% expense ratio.
Invesco Solar ETF (TAN)
“Solar has caught a bid on the conflict with Iran as oil importing countries look for back-up energy sources,” Reyna says. “Clean energy is also seeing strong demand from data centers that need ‘behind-the-gate’ energy resources amidst slow domestic grid connection queues.” TAN is currently up 82.7% on a one-year trailing return basis as of April 1. The ETF charges a 0.7% expense ratio.
TAN passively tracks the MAC Global Solar Energy Index. The ETF currently holds 31 stocks, with most falling within the technology, utilities and industrial sectors, with a modest allocation to financial companies. TAN’s portfolio is relatively concentrated at the top, with First Solar Inc. (FSLR) making up 10% of assets, followed by NextPower Inc. (NXT) at 9.9% and Enphase Energy Inc. (ENPH) at 6.5%.
Invesco Water Resources ETF (PHO)
“Data centers are also a key strength for water companies as they need millions of gallons per day in cooling,” Reyna says. “The recent $4.75 billion purchase of CoolIT Systems by EcoLab Inc., the fourth-largest holding in PHO, shows water companies continuing to see growth in this space moving forward.” This thematic ETF manages about $2 billion in assets and charges a 0.59% expense ratio.
PHO tracks the Nasdaq OMX US Water Index, offering exposure to companies involved in water infrastructure, treatment and distribution. PHO’s portfolio is dominated by industrials, with smaller allocations to utilities, technology and materials. In addition to Ecolab Inc. (ECL), top holdings include Roper Technologies Inc. (ROP), Waters Corp. (WAT), American Water Works Co. Inc. (AWK) and Xylem Inc. (XYL).
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7 Best Thematic ETFs to Buy in 2026 originally appeared on usnews.com
Update 04/02/26: This story was previously published at an earlier date and has been updated with new information.