AIPI's 36.5% weekly yield masks a 12-point lag to QQQ

The REX AI Equity Premium Income ETF pays $13.75 a year per share in weekly distributions, but its covered-call strategy has capped total return at 15% over the past 12 months — roughly half the gain of the plain-vanilla Nasdaq-100.

A 36.5% distribution yield paid in weekly slices pulls income investors toward the REX AI Equity Premium Income ETF (NASDAQ:AIPI). The fund packages exposure to major artificial intelligence names with a covered-call overlay that distributes cash every seven days. The problem is that a distribution rate is not a return, and once the two are separated, AIPI starts to look like a fund quietly financing part of its own payout.

"The current rangebound AI market is ideal for aggressive call writing, but a significant portion of these payouts may be a return of capital," said Cain Lee, an analyst at Seeking Alpha. "If AI stock volatility decreases or the sector experiences a sharp decline, the sustainability of the yield comes into question."

Over the past year, AIPI returned 15% on price, while the Invesco QQQ Trust (NASDAQ:QQQ), which tracks the Nasdaq-100 and holds most of the same AI names, returned 27%. Year-to-date, the gap widens further: AIPI is up 5% against QQQ's 15%. That roughly 12-percentage-point delta is the covered call in action. When NVIDIA rips through a strike price, AIPI's call writer hands the upside to the option buyer and collects premium instead. In a bull run for AI, capped upside is the entire story.

The stakes are straightforward for the $414 million fund. AIPI owns a basket of AI-linked equities — top positions include Palantir (NASDAQ:PLTR), CrowdStrike (NASDAQ:CRWD), NVIDIA (NASDAQ:NVDA), Datadog (NASDAQ:DDOG) and ARM (NASDAQ:ARM) — split roughly 40% into "Purity Leaders" with direct AI revenue and 60% into "Key Enablers" in infrastructure and services. The manager sells slightly out-of-the-money call options on those names to harvest premium. That premium, plus return of capital, funds the distributions. In May 2026, the fund shifted from monthly checks to weekly ones, landing between $0.243583 and $0.263988 per share. Same money, more frequent envelopes.

The Yield That Eats Its Own Principal

Distributions on top of a share price that drifts sideways create an optical illusion. The trailing 12-month distribution of $13.75 per share on a roughly $35 stock is real cash. But if a chunk of it is a return of capital, as multiple analysts have argued, the fund is partly refunding your own money and calling it yield. The Pluang analysis from earlier this month warned that "a significant portion of these payouts may be a return of capital, raising concerns about the long-term sustainability if AI stock volatility decreases or the sector experiences a sharp decline."

Covered-call income funds shine in one specific regime: sideways chop. When AI stocks trade in a range, option premiums are fat, calls expire worthless, and the fund keeps both the premium and the shares. Roberts Berzins framed the downside case just as cleanly, noting that "a significant L-shaped sell-off in the AI sector poses the primary risk to both its income generation and Net Asset Value." Sharp rally hurts you. Sharp crash hurts you more. Grinding sideways is the sweet spot.

Who the Fund Fits

The investor AIPI fits is specific. Retirees or income-focused holders who want a small tactical AI sleeve — 3% to 7% of a diversified portfolio — who genuinely need weekly or monthly cash flow, and who track total return rather than the distribution headline. The 0.65% expense ratio on an actively managed AI sleeve is not cheap, and the portfolio leans hard on a narrow set of volatile names.

If you are buying AIPI because you want to own the AI boom, you are in the wrong fund. QQQ has already handed you nearly double the return over the past year, without the return-of-capital accounting, without capped upside, and at a fraction of the expense. The 36.5% yield is real. What matters is what is left of your share price when the checks stop being novel.

This article is for informational purposes only and does not constitute investment advice.