European thematic UCITS ETFs posted a dramatic resurgence in the first half of 2025, with net inflows of USD8.73 billion year-to-date, according to ARK Invest Europe’s latest quarterly update detailing H1 2025 European thematic ETF flows.
The turnaround marks a decisive reversal from the muted flows of 2024 (USD308 million net outflows for the whole of 2024), as investors rotate back into forward-looking, innovation-driven themes with clearer earnings visibility.
Defence remains the dominant thematic allocation, capturing USD7.87 billion in combined net inflows between Global (USD4.81 billion) and European (USD3.05 billion) defence ETFs underscoring its evolution from a tactical trade to a structural portfolio allocation. Maintaining its position as the defining technological theme, AI ETFs saw USD904 million in net inflows, with investor appetite fuelled by relentless innovation in large language models, robotics, and autonomous systems.
In the same period, Cybersecurity ETFs continued to rebuild momentum after significant outflows in 2024 (USD311 million net outflows for H1 2024), drawing USD318 million, reflecting growing investor conviction in cybersecurity as a structural necessity amid rising digital threats.
Clean Energy ETFs saw outflows of USD307 million. As policy momentum stalls in key markets, investors are increasingly selective within the energy transition space. Capital is rotating toward subsectors with clearer economic moats, such as nuclear and grid infrastructure. Supporting this sentiment, Uranium ETFs rank fifth at USD253 million, reflecting growing investor interest in the nuclear sector as a potential solution to global energy needs.
Healthcare Innovation ETFs recorded net outflows of USD279 million. The drawdown reveals investor caution around legacy biotech firms with uncertain drug pipelines and reimbursement risks. Interest is shifting toward AI-driven healthcare platforms offering faster innovation cycles and more scalable business models.
Electric Vehicles and Battery Tech ETFs saw net outflows of USD203 million as investor enthusiasm cools amid subsidy rollbacks and plateauing EV demand in major markets. Persistent concerns around battery raw materials and production bottlenecks have further weighed on the theme.
Rahul Bhushan says, “After a cautious 2024, it’s evident that investors are re-engaging with innovation themes that offer clearer earnings visibility and resilience in an increasingly complex macro landscape. We’re seeing investor conviction in megatrends with structural tailwinds, particularly defence, AI, and energy security. Thematics are no longer just tactical bets, they’re core strategic exposures.”
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