U.S. manufacturing contracted for a sixth consecutive month in August, with the ISM manufacturing purchasing managers index (PMI) easing back to 48.7 from 48.0 in July, indicating continued weakness in traditional industrial activity.

Tariffs and sluggish demand continue to weigh on output, pressuring employment and production. The PMI's production index slipped to 47.8, and firms continue to trim headcounts amid subdued sentiment.

But through the gloom, there is a strong countertrend building: companies are increasing investments in AI gear and intellectual property, the quickest such rate in four years. That is coming through in the ISM new orders sub-index, which climbed to 51.4, at last breaking into expansionary territory after six months of decline. The divergence signals a subdued but increasing movement towards factory overhauls and automation.

This split is already unfolding in the ETF market:

Traditional industrial ETFs, including the Industrial Select Sector SPDR Fund (XLI  ), are still struggling, reflecting the declining performance of old manufacturing. The fund is down 1.5% on Tuesday.

Even while U.S. manufacturing languishes in contraction, firms are investing heavily in artificial intelligence products, serving as a buffer against tariffs, Reuters reported.

That pivot can drive investor interest toward AI- and automation-themed ETFs that aim to capture the capital pouring into faster, more intelligent factory floors. Highlights include:

Global X Robotics & Artificial Intelligence ETF (BOTZ  ) - explores companies constructing industrial robots and AI-powered production platforms. 40% of its holdings are focused on the Industrials sector.

ROBO Global Robotics & Automation ETF (ROBO  ) - a wide basket of automation pioneers, ranging from chip makers to factory-software masters. 21% of its holdings are focused on Manufacturing & Industrial Automation.

Combined, these funds offer investors an opportunity to play the manufacturing upgrade cycle without investing in one company, and without being exposed to the slower-moving segments of the industrial economy.

Economists are anticipating this AI-spending-capital trend to persist, especially during more favorable tax incentives such as accelerated depreciation following the Trump administration's tax and spending bill, according to Reuters. While businesses caution that sustained tariff pressures, despite delayed passthrough, may ultimately transfer higher input costs to consumers, economists expect more investment in AI to occur in the near future.

The industrial base continues to be weak. But the increase in new orders fueled by AI-capital investment implies that the next industrial growth cycle will be less steel and assembly line driven and more semiconductor and robotics driven. ETFs such as BOTZ, and ROBO may provide the smoothest route to profit from that trend.