Artificial intelligence (AI) captured the attention of the investing world like few things that have come before. The excitement around the technology thrust companies once known mostly to tech enthusiasts into the mainstream, while firms across Silicon Valley have seen their stocks rocket up to historic highs on the promise of AI.

It's not often a technology as transformative as artificial intelligence comes along

It's still early days for AI, and there can certainly be a danger in getting ahead of ourselves. However, you don't have to subscribe to the loftiest predictions surrounding AI -- and there are many -- to see that it has the power to be truly transformative to the world's economy.

Here are just a few predictions from some reputable sources:

  • The International Monetary Fund (IMF) estimated in a recent analysis that 40% of global employment will be affected by AI. In "advanced economies," like the U.S., that figure could be as high as 60%.
  • PwC -- one of the "Big Four" accounting firms -- believes AI can add $15.7 trillion to the global economy by 2030.
  • McKinsey & Company -- one of the world's biggest consulting firms -- estimates generative AI alone could add $4.4 trillion annually to the economy. For context, the total gross domestic product (GDP) of the United Kingdom is $3.1 trillion.

ETFs are a powerful tool

One of the best ways to invest is through exchange-traded funds (ETFs). They offer an easy way to gain exposure to a collection of stocks (and other assets) by purchasing just one security. ETFs are a lot like mutual funds, except that you can buy and sell them the same way you would an individual stock, and they typically have lower fees.

Many of the most popular are broad-market ETFs that track an index like the S&P 500, such as the Vanguard S&P 500 ETF. Many ETFs have a narrower target, however, investing in a specific industry or sector of an industry, like AI.

There are a lot of ETFs to consider

So, where should you invest your $500? Well, ETFs are hugely popular, and no sector has as much buzz as AI, so there are plenty of options. There are currently about 40 offerings, but here are the top five by assets under management (AUM).

  • iShares U.S. Technology ETF
  • Fidelity MSCI Information Technology Index ETF (FTEC -1.52%)
  • First Trust Dow Jones Internet Index Fund
  • iShares Expanded Tech Sector ETF (IGM -1.34%)
  • iShares Global Tech ETF

You'll notice a lot of overlap here with the larger technology industry. There are more granular options, focusing on smaller AI-native companies. But I think a more broad-based offering is the better option: The more concentrated an ETF becomes, the riskier it becomes.

While the Fidelity MSCI Information Technology Index ETF is the lowest cost, with an expense ratio of just 0.08%, for my money, the iShares Expanded Tech Sector ETF is the best option and where I would invest the $500.

At just 0.4%, it is still has a relatively low cost -- $40 annually per $10,000 invested. But it has performed slightly better than Fidelity's option over the past few years, making up for the slight increase in cost. In fact, this year, the Expanded Tech Sector ETF outperformed all of these AI ETFs and the Nasdaq as a whole.

I also like the makeup of its holdings better. Fidelity is much more heavily concentrated at the top, with its top three positions accounting for about 44% of the fund's value. In contrast, the iShares Expanded Tech Sector ETF has about 25% invested in its top three.

Don't forget Meta

Furthermore, Meta Platforms (META -0.59%) is one of the iShares ETF's top holdings, but is conspicuously absent from Fidelity's fund -- FTEC holds 296 equities, but Meta isn't among the list. I think Meta is one of the strongest AI plays among big tech and I'm not alone in this: Meta is one of the top 5 holdings of many of the premier hedge funds on Wall Street.

The firm continues to deliver in core business: it currently operates the first-, third-, fourth-, and seventh-most popular social media platforms in the world, reaching an incredible 3.29 billion people a day. This influence makes its ad space immensely valuable, leading Meta to deliver double-digit revenue growth quarter after quarter since Q1 2023.

And now the company's AI efforts are paying off, helping to compound its success in advertising by boosting efficiency and enhancing targeting algorithms and the successful release of its flagship product, Meta AI, proves that the company can create an AI platform people actually like, something even Apple is struggling with. I believe these early successes are just a taste of what's to come; Meta's long commitment to AI research will lead to products that will greatly enhance, if not outright transform, its business.

Whether you have $500 or $500,000, you could do worse than investing in the companies fueling an AI revolution. An ETF fund like the iShares Expanded Tech Sector fund is an excellent way to do so quickly, simply, and cheaply.