U.S. Global Investors (NASDAQ:GROW) CEO Frank Holmes talked with Proactive about the continued performance of the War ETF, launched in December 2024.
The ETF has shown resilience amid geopolitical unrest and has outperformed other national security-focused ETFs. Holmes highlighted that the success lies in “smart beta 2.0,” a strategy emphasizing momentum in revenue, earnings, and cash flow, with companies like Qualcomm and General Dynamics showing notable strength.
Proactive: All right. Welcome back inside our Proactive newsroom. And joining me now is Frank Holmes. He is the CEO of US Global Investors. And Frank, it's great to see you again. How are you?
Frank Holmes: I'm outstanding.
Good. Well, I'm glad to hear that. I want to talk to you a little bit about the War ETF. And let's remind everyone a little bit about this one. You launched it back in December of 2024, right?
Correct. And it had to deal with the big rearmament that's taking place, particularly using AI.
So tell me a little bit about how AI is so key in what we're seeing on the military side of things.
Two things happened. President Trump initiated a trade war on Valentine's Day, targeting Canada and Mexico. Then on April 2nd, he declared a “Liberation Day,” targeting everyone else. The markets initially sold off, but interesting to me is that War didn't sell off much. It's actually up and has outperformed all the other national security ETFs. I think the reason is our smart beta 2.0 approach, which looks for the strongest momentum in revenue, earnings, and cash flow. Companies like Qualcomm and General Dynamics have been quite resilient.
President Trump also used a shame game strategy to push NATO and Europe into increasing defense spending. At first, that was seen negatively, but it has led to major spending increases. Even with efforts like Elon Musk’s DOGE program, military spending is focused on rebuilding capacity. The US is now estimated to be spending nearly $3 trillion.
Shortly after the ETF launched — the ticker is WAR on the NYSE — we saw rising tensions in Ukraine and Israel, and even between Pakistan and India. Geopolitical risks seem to be growing everywhere, and solving those issues can be a challenge.
It is a challenge. In April, the US pulled back its trade aggression on everyone except China. That’s where the real tension lies. China conducted two major cyber hacks — Volt Typhoon and Salt Typhoon — that infiltrated US power systems and telecoms. As a result, US cybersecurity spending is rising. Most of the military aid to Ukraine involved older equipment, and now that’s being rebuilt using the latest Nvidia chips.
Are you suggesting that the rise in tensions, particularly in Europe, is causing a spending surge that’s rippling into North America and Canada?
Yes, the trickle-down effect is real. Military spending has created jobs and prompted Europe to re-evaluate its defense priorities. China has built more icebreakers than Canada and even tried to buy a former US military base in Greenland. Since Xi Jinping became dictator for life, military and naval spending has risen significantly.
I believe the US needs to replicate what Reagan did — outspend its rivals. That led to the fall of the Berlin Wall. Increased spending will also benefit healthcare, tech for soldiers, and cybersecurity. We must protect our borders.
Lastly, global military spending reached $2.7 trillion in 2024, a new record. Do you think it could go beyond that?
Yes, I think it's going through $3 trillion. The AI boom is real. We’re also seeing big capital allocations to data centers, which are part of the ETF. You need high-performance computing data centers to power mobile AI. In Montreal, we’re seeing a boom in HPC. There's also growing investment in AI and data centers in Canada and Europe.
Quotes have been lightly edited for clarity and style