Historic S&P 500 Gains Driven by Major Tech Companies and AI
The S&P 500 (SNPINDEX: ^GSPC) has achieved back-to-back annual gains of 25% or more (including dividends) only two times since its inception in 1957. These occurrences were during the dot-com internet boom in 1997 and 1998, and more recently, during the artificial intelligence (AI) boom in 2023 and 2024.
The significant gains over the past two years have been primarily driven by some of the largest companies in the index, including multitrillion-dollar giants like Nvidia, Amazon, Apple, and Microsoft. These tech leaders have invested heavily in developing robust AI infrastructure and software, leading to staggering stock gains: 106% in 2023, followed by another 64% in 2024.
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This strong performance indicates that investors who have not held shares in these four companies over the past two years likely lagged behind the S&P 500. However, there’s a straightforward approach to invest in all of them, along with a broad portfolio of America’s largest firms.
Invest in an ETF with Major AI Players
The Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) is an exchange-traded fund (ETF) that consists of 69 large-cap stocks, with 43.2% of its portfolio value attributed to Nvidia, Amazon, Apple, and Microsoft.
Image source: Getty Images.
Within the ETF, the technology sector constitutes a remarkable 59.7% of the total portfolio value. This heavy weighting stems from the ETF’s top three holdings—Apple, Microsoft, and Nvidia—each of which ranks among the world’s most valuable companies, collectively worth around $9 trillion.
Portfolio Composition Highlights
The consumer discretionary sector ranks second with a 20.9% weighting, featuring Amazon, which is the ETF’s fourth-largest holding:
|
Vanguard ETF Portfolio Weighting |
|
|---|---|
|
1. Apple |
13.92% |
|
2. Microsoft |
11.14% |
|
3. Nvidia |
10.93% |
|
4. Amazon |
7.24% |
Data source: Vanguard. Portfolio weightings are accurate as of Feb. 28, 2025, and are subject to change.
Each of the aforementioned companies is actively investing in AI. They are not only rolling out new AI products but also integrating AI technologies into their existing offerings. For example, Apple has introduced Apple Intelligence software to enhance functionality on its devices, allowing users to summarize texts and emails with a single tap.
Furthermore, Microsoft and Amazon dominate the cloud computing sphere, providing essential platforms for businesses looking to build AI software. Their cloud services deliver the necessary infrastructure and large language models (LLMs) that facilitate AI development.
Among their innovations, Microsoft has embedded its AI assistant, Copilot, into Windows and Office 365. Meanwhile, Amazon’s Rufus helps customers make smarter buying decisions on Amazon.com.
Nvidia plays a critical role in this ecosystem, supplying graphics processing units (GPUs) essential for data centers. The company’s latest Blackwell GPUs are the most advanced chips available for AI development. CEO Jensen Huang anticipates significant revenue growth as infrastructure spending expands.
Additionally, the Vanguard ETF includes other prominent AI companies such as Meta Platforms, Tesla, Alphabet, Broadcom, and Advanced Micro Devices.
Enhancing Your Portfolio with the Vanguard ETF
The Vanguard ETF has produced a compound annual return of 13.1% since its inception in 2007, outpacing the S&P 500’s average annual return of 10.4% during the same period. While the difference may seem small, over time, it can result in substantially higher returns due to the power of compounding:
|
Starting Balance In 2007 |
Compound Annual Return |
Balance at the end of 2024 |
|---|---|---|
|
$10,000 |
13.1% (Vanguard ETF) |
$81,070 |
|
$10,000 |
10.4% (S&P 500) |
$53,761 |
Calculations by author.
While it is important not to concentrate too heavily on a single investment, the Vanguard ETF is highly focused. The AI boom is still developing, and if it underachieves, many of the stocks in this ETF could see diminished performance.
Investing in this ETF should be considered as part of a well-rounded portfolio strategy. For perspective, a $10,000 investment in the S&P 500 in 2007 would be valued at $53,761 today. Conversely, a combined investment of $5,000 in the S&P 500 and $5,000 in the Vanguard ETF would lead to a value of $67,415.
Consequently, a balanced mix can enhance your portfolio while managing risks associated with large-cap technology stocks.
A Lucrative Investment Opportunity Awaits
If you’ve ever felt you missed out on high-performing stocks, this might be your chance.
Our experienced analysts occasionally release a “Double Down” Stock recommendation for companies poised for significant growth. If you’re concerned about having missed your opportunity, now could be the ideal time to invest before it’s too late. Here’s a glimpse of past performance:
- Nvidia: A $1,000 investment when we recommended it in 2009 would be worth $307,378!
- Apple: A $1,000 investment from 2008 would now be $40,591!
- Netflix: A $1,000 investment from 2004 would fetch $512,780!
We are currently issuing “Double Down” alerts for three outstanding companies, and opportunities like this may not arise again soon.
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*Stock Advisor returns as of March 18, 2025
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
