When it comes to investing in artificial intelligence, or AI stocks, there are several great ETFs that will allow you to do that without much individual stock risk. Some track various AI-focused indexes, while others are actively managed funds that try to beat the benchmark indexes.
However, you might be surprised how much AI exposure the Invesco QQQ ETF (QQQ -0.49%), has. This index fund, which tracks the Nasdaq-100 index, provides exposure to large-cap AI stocks and more, and with investment fees less than half of most other AI ETFs. Here’s a rundown of what the Invesco QQQ ETF is, why it could be a great AI ETF, and other important things to know about it.
Why the Invesco QQQ ETF could be all the AI exposure you need
As mentioned, the Invesco QQQ ETF tracks the Nasdaq-100 index, which consists of the 100 largest non-financial companies listed on the Nasdaq stock exchange. The ETF has a 0.20% expense ratio, which is less than half of what most AI-focused ETFs charge (even those that simply track an index). For example, one leading AI ETF has a 0.68% expense ratio, which means that you’ll pay $68 in annual investment expenses on a $10,000 investment. This might not seem like a massive amount, but this difference in expense ratios can make a big difference in your long-term investment performance.
To be sure, this is not a pure-play AI ETF. Just to name a few, Costco (COST 0.11%), PepsiCo (PEP 0.07%), and Starbucks (SBUX -0.44%) are Nasdaq-100 components that aren’t direct AI plays.
However, you might be surprised at how much AI exposure there is here. Of the ETF’s top 10 holdings, only one of them (Costco) isn’t a direct investment in AI technology. The other nine account for more than 50% of the fund’s assets and include Apple (AAPL -0.30%), Nvidia (NVDA -0.54%), Microsoft (MSFT 0.01%), and other big-cap tech stocks.
Even beyond the top 10, there are plenty of AI stocks that have tons of room to grow. CrowdStrike (CRWD -1.61%) and The Trade Desk (TTD -0.30%) are just two examples. A quick estimate based on the fund’s current portfolio indicates that at least 70% of the Invesco QQQ ETF’s assets are invested in AI stocks, and that’s with using a rather conservative definition of what an “AI stock” is.
The point is that the Invesco QQQ ETF offers a ton of AI exposure for a fraction of the cost of the pure-play “AI ETFs.” Your performance over time won’t depend too much on any single AI stock, and as long as the AI trend produces a net positive outcome for the Nasdaq, your investment will grow over the long term. For context, the ETF has produced a 436% total return for investors over the past decade, and many experts believe the AI-fueled surge is just getting started.
Confident I’ll win – regardless of which companies are the big AI winners
To be sure, there are some other excellent AI exchange-traded funds in the market. Many have more or less the same top holdings as the QQQ ETF, however, and with significantly higher fees. The Ark Autonomous Technology & Robotics ETF (ARKQ -2.73%) is one example that has a particularly unique strategy and could be worth a look for more risk-tolerant investors.
Having said that, as far as the ETF that I’d be most confident to put my money into that would win regardless of what companies emerged victorious in the AI boom, the Invesco QQQ ETF, with its low fees and diverse makeup, would be my top choice.
