Artificial intelligence (AI) has moved beyond hype to become a transformative business technology. Major corporations now spend billions developing and deploying AI solutions across industries from healthcare to manufacturing, creating massive trillion-dollar market opportunities.
While AI stocks dominate headlines and market returns in 2024, separating hype from reality challenges even seasoned investors. Most companies remain in early-development stages, burning through capital with uncertain paths to profitability. Exchange-traded funds (ETFs) offer a safer way to participate in this emerging technology trend by spreading the risk across multiple companies.
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The three ETFs discussed below offer different approaches to AI investing, from established tech giants to emerging innovators. Here's why busy investors may want to consider these funds for long-term AI exposure.
Low-cost tech leader
The Vanguard Information Technology ETF (VGT -1.56%) provides broad exposure to tech companies driving AI adoption. This passively managed ETF's minimal 0.10% expense ratio and low 15.4% turnover rate make it an efficient vehicle for long-term investors.
Semiconductors comprise 28.8% of the fund's portfolio, while software companies represent 20.2%. This balance provides exposure to both AI infrastructure builders and companies deploying the technology.
The Vanguard Information Technology ETF's top holdings include AI leaders like Nvidia, Microsoft, and Apple, along with emerging tech players like Confluent and Silicon Laboratories. Since its inception in 2004, the fund has significantly outperformed the benchmark S&P 500, thanks to the growing influence of technology -- and AI, more specifically – across the globe.
Growth through innovation
The Invesco QQQ Trust ETF (QQQ -1.33%) tracks the 100 largest non-financial Nasdaq companies, offering exposure to major AI adopters and developers. With a moderate 0.20% expense ratio, this passively managed fund provides cost-effective access to innovative large-cap companies.
The Invesco QQQ Trust's impressive track record speaks to the tech's market leadership. The fund has delivered a staggering 426% total return (including distributions and assuming reinvestment) over the prior 10 years, significantly outpacing the S&P 500.
Top holdings include AI pioneers like Microsoft, Nvidia, and Meta Platforms. The Invesco QQQ Trust's $291 billion in assets and high trading volume provide excellent liquidity for investors seeking active portfolio management.
Emerging AI opportunities
The ARK Autonomous Technology & Robotics ETF (ARKQ -2.20%) focuses on companies developing next-generation AI applications. As an actively managed fund, it carries a significantly higher 0.75% expense ratio than the other ETFs on this list to cover the costs of ongoing research and portfolio management to identify emerging leaders in robotics, autonomous vehicles, and AI.
The ARK Autonomous Technology & Robotics ETF's concentrated portfolio of 30 to 50 equities over a typical holding period provides focused exposure to innovative companies. Top positions include Tesla, Kratos Defense, and UiPath, offering investors access to various AI developers and applications.
The fund's performance demonstrates both the potential and risks of emerging tech investing. While delivering a 12.57% average annual return since inception, this fund has experienced significant volatility, making it best suited for risk-tolerant investors.
The smart way to play AI
These ETFs present three distinct paths to AI investing in 2024. The Vanguard Information Technology ETF offers a low-cost foundation in established tech leaders, while the Invesco QQQ Trust provides focused exposure to innovative Nasdaq companies. For investors comfortable with higher volatility, the ARK Autonomous Technology & Robotics ETF targets early-stage AI innovators.
As AI reshapes industries from autonomous vehicles to cloud computing, these funds let investors participate in the transformation without betting on individual companies. Each ETF's unique approach -- from conservative to aggressive -- allows investors to match their AI exposure to their risk tolerance and investment goals.
