Here's a wild idea: what if a software ETF actually required its holdings to make money?
That's the premise behind the AOT Software Platform ETF (AOTS), which launched Tuesday from AOT Invest. The firm thinks traditional market cap-weighted tech funds are missing something important, namely whether the companies they own are actually profitable. So they built an ETF that filters for quality instead of just following size.
The fund tracks 50 companies that build the infrastructure powering modern digital life—think cloud platforms, enterprise software, and payment systems. But there's a catch for getting in: you need at least 20% of your revenue coming from software activities, and you have to show positive earnings. That second requirement alone sets it apart from the growth-obsessed tech ETFs that happily load up on money-losing businesses.
The index underlying AOTS ranks companies using three equally weighted factors: cost of goods sold relative to revenue, earnings-to-price ratio, and return on invested capital. Individual positions are capped at 7.5% and floored at 0.5%, which prevents the fund from becoming a mega-cap tech clone while still maintaining meaningful exposure to winners.
Speaking of mega-caps, they're still here. The top five holdings are Nvidia Corp (NVDA), Meta Platforms, Inc (META), Microsoft Corp (MSFT), Amazon.com Inc (AMZN), and Alphabet Inc (GOOGL), which together make up 32.9% of the portfolio. Netflix Inc (NFLX) and Oracle Corp (ORCL) also crack the top ten.
But here's where it gets interesting. The fund's definition of "software platform" stretches beyond traditional tech boundaries. Visa and Mastercard together account for 10.5% of the fund, a reflection of AOT's view that software-driven business models matter more than industry classifications. If your competitive advantage runs on code and scales digitally, you're in the conversation.
AOT is betting this approach makes particular sense as artificial intelligence moves from hype to actual deployment. The firm argues that software platforms benefit from near-zero marginal costs at scale and recurring subscription revenue, a combination that could translate into serious profitability as AI demand accelerates. In other words, companies that already know how to make money from software are better positioned to make money from AI software.
The ETF carries a 0.49% expense ratio, which sits in the middle of the road for thematic funds. Whether this profitability-first framework delivers better returns than vanilla market cap weighting remains to be seen, but at least investors know their exposure includes companies that have figured out how to turn revenue into actual earnings.