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“Investing in the Future: A Vanguard ETF Poised for Growth in the AI Evolution of 2025”

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Investing in AI: Seizing Opportunities in the Tech Sector’s New Frontiers

The technology sector is currently experiencing significant changes due to the emergence of two groundbreaking subsectors: Agentic AI and Physical AI. Agentic AI represents a new wave of artificial intelligence that allows machines to make decisions independently, handling complex tasks without the need for constant human supervision. On the other hand, Physical AI refers to sophisticated robotics that can efficiently navigate and interact with the real world.

For investors, selecting standout companies in these fast-moving AI fields is challenging. Hundreds of firms are competing to introduce innovative technologies in these subfields, but not all will succeed due to various uncertainties.

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A humanoid robot walking down an aisle of a data center.

Image source: Getty Images.

One effective strategy for investors is to consider low-cost exchange-traded funds (ETFs). This investment approach provides a balanced way to tap into the significant growth potential of both software-focused agentic AI and hardware-centric robotics while mitigating risks associated with individual companies.

The Vanguard Information Technology ETF (NYSEMKT: VGT) stands out as an ideal option for those looking to engage with these transformative trends. With an impressive expense ratio of just 0.10%—well below the 0.95% average of similar funds—this ETF grants access to 316 technology firms leading the charge in AI innovation.

Leading the Charge in Smart Technology

The largest holdings in the fund highlight top players in technological advancement. Apple, Nvidia (NASDAQ: NVDA), and Microsoft account for more than 44% of the total portfolio. These industry leaders possess the resources necessary to invest in cutting-edge technologies like agentic AI and robotics.

Moreover, leaders in enterprise software, such as Salesforce and Oracle, are crucial for integrating these advanced AI applications into businesses. As top-10 fund holdings, their established customer relationships across diverse sectors provide them with distribution channels for emerging AI technologies.

The Robotics Revolution

Physical AI is set to transform robotics by fusing advanced machinery with sophisticated AI capabilities. The Vanguard fund includes significant investments in key semiconductor companies, including Nvidia, Broadcom, and Advanced Micro Devices, which create essential processors for physical AI technologies. Nvidia alone represents 15.4% of the portfolio.

Intelligent robots have vast potential markets, including manufacturing, healthcare, logistics, and consumer goods. As these innovations transition from research to commercial application, companies focusing on both hardware and software are poised for success in this growth area.

Harnessing Innovation Across Various Platforms

While consumer applications of AI often steal the spotlight, the business-to-business sector presents equally promising opportunities. The fund’s diverse holdings cover the complete enterprise technology spectrum, extending from cloud infrastructure to tailored business applications. Investors can benefit as companies in every industry begin adopting agentic and physical AI technologies.

The adoption of these technologies is not confined to traditional tech hubs; they are spreading into mainstream sectors such as manufacturing, healthcare, finance, and retail. The fund, with its variety of technology providers and proven histories of innovation, is positioned to serve this expanding business demand.

Why This Fund Makes Sense for Investors

Investing in the Vanguard fund allows shareholders to partake in the agentic and physical AI breakthrough through one low-cost investment. The fund’s focus on large-cap companies—with a median market capitalization of $512.2 billion—offers stability while pursuing the growth of new AI technologies.

Although the journey toward widespread AI adoption may be unpredictable, the fund’s diversified strategy, centered around established technology firms, helps to manage risks. As these two significant AI subsectors evolve from concept to reality in the coming year, the Vanguard Information Technology ETF represents a balanced way for investors to engage in this technological shift.

Is Now the Time to Invest $1,000 in the Vanguard Information Technology ETF?

Before purchasing shares in the Vanguard Information Technology ETF, it’s important to consider the following:

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George Budwell owns shares in Apple, Microsoft, Nvidia, and the Vanguard World Fund-Vanguard Information Technology ETF. The Motley Fool holds positions in and recommends Advanced Micro Devices, Apple, Microsoft, Nvidia, Oracle, and Salesforce. The Motley Fool also recommends Broadcom and has options recommendations on Microsoft. For additional details, see the Motley Fool’s disclosure policy.

The views and opinions expressed here are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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