Falling Short in the Digital Age: Evaluating the Performance of Data Center ETFs

Davinder K. Malhotra (), Ivar Kirkhorn and Frank Ragone
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Davinder K. Malhotra: School of Business, Thomas Jefferson University, Philadelphia, PA 19144, USA
Ivar Kirkhorn: School of Business, Thomas Jefferson University, Philadelphia, PA 19144, USA
Frank Ragone: School of Business, University of Chicago, Chicago, IL 60637, USA

JRFM, 2025, vol. 18, issue 8, 1-17

Abstract: This study evaluates the performance of U.S. data center Exchange-Traded Funds (ETFs) relative to major equity and technology benchmarks, using monthly returns from January 2000 through December 2024, with particular emphasis on the COVID-19 period and the subsequent post-vaccine era. Data center ETFs have not provided better risk-adjusted returns even though they are often advertised as access points to the digital economy. Digital infrastructure demand increased through the pandemic but did not improve the performance of these funds which stayed weak across both traditional and conditional multi-factor asset pricing models. These ETFs struggle with asset selection and market timing proficiency, which leads to relatively poor performance results during volatile market conditions. The downside risks linked to these funds tend to match or exceed the downside risks of broader indices like the S&P 1500 Information Technology Index. Although these investments are based on strong thematic narratives, they do not achieve returns that align with investor expectations.

Keywords: data center ETFs; digital infrastructure; risk-adjusted returns; conditional value at risk (CVaR) downside risk; thematic investing (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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