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AI Boom Fuels Baron ETF's Top Pick
17 Sep
Summary
- Baron SMID Cap ETF underperformed its benchmark in Q2 2026.
- Coherent Corp. significantly contributed to the fund's performance.
- AI data center buildouts are driving demand for Coherent's photonics.
The Baron SMID Cap ETF experienced a second quarter in 2026 with a 15.62% return, falling short of the Russell 2500 Growth Index's 24.02%. This underperformance was influenced by the fund's positioning in Momentum and Beta factors.
The investment management company noted that companies involved in AI, specifically those in chips, power equipment, and AI data center financing, continued to lead market trends. The portfolio's top holdings, comprising 29.3% of assets, are viewed as long-term cash flow compounders.
A significant contributor to the Baron SMID Cap ETF's performance during the quarter was Coherent Corp. (NYSE:COHR). This company manufactures essential materials and laser systems for data center, industrial, and communications applications. Its involvement in photonics, which transmits information at the speed of light, positions it to benefit from the surge in AI data center construction.
Baron SMID Cap ETF highlighted Coherent Corp.'s role in enabling the massive wave of AI data center installations, a key driver for performance in the first quarter and continuing into the second. Coherent Corp. closed at $289.93 per share on September 16, 2026, with its shares having seen substantial growth over the past year.
