Investing in AI: High-Growth Stocks and ETFs to Consider
The S&P 500 (SNPINDEX: ^GSPC) has experienced a strong bull market since October 2022, gaining 20% over the last year. Technology stocks, especially in the artificial intelligence (AI) sector, have been the main drivers of this rise:
- Palantir Technologies has surged by 369%.
- Nvidia is up by 85%.
- Broadcom has appreciated by 78%.
As the AI industry is still evolving, predicting long-term winners and losers can be challenging. Although these stocks have performed well recently, their future performance remains uncertain. This uncertainty makes investing in an exchange-traded fund (ETF) an appealing alternative to selecting individual stocks.
Where should you invest $1,000 today? Our analysts just identified the 10 best stocks to invest in right now. Learn More »
The iShares Future AI and Tech ETF (NYSEMKT: ARTY) includes stakes in 50 companies leading the AI boom, allowing investors to participate for as little as $40.
Image source: Getty Images.
Leading AI Stocks in One ETF
The iShares Future AI and Tech ETF was established in 2018 to invest in robotics and AI. It was revamped in August 2024 to focus solely on AI and its subsegments, such as software and data center infrastructure.
This ETF consists of 50 different stocks, but its 10 largest holdings represent 39.4% of its total portfolio value. This concentration can be risky, as the performance of these major players significantly influences the ETF’s results. The top firms driving this AI wave include:
|
Stock |
iShares Future AI and Tech ETF Portfolio Weighting |
|---|---|
|
1. Broadcom |
5.41% |
|
2. Arista Networks |
4.61% |
|
3. Palantir Technologies |
4.25% |
|
4. Vertiv Holdings |
4.07% |
|
5. Nvidia |
3.96% |
|
6. Super Micro Computer |
3.79% |
|
7. Constellation Energy |
3.65% |
|
8. Advanced Micro Devices |
3.63% |
|
9. International Business Machines |
3.05% |
|
10. Snowflake |
3% |
Data source: iShares. Portfolio weightings are accurate as of Feb. 6, 2025, and are subject to change.
Broadcom is a major player in producing AI accelerators, helping clients like Alphabet customize their chips for various data tasks. The company reported a remarkable 220% increase in AI-related revenue for its fiscal 2024, largely thanks to its sales in data center technology.
Meanwhile, Palantir Technologies has rapidly gained attention for its software that utilizes AI to optimize data usage for both companies and government entities. Despite a staggering 369% rise in stock value over the past year, analysts predict a potential further increase of 300%.
Nvidia remains the leading supplier of high-end graphics processing units (GPUs) for data centers. Its advanced Blackwell architecture is essential for training AI models and it is poised to expand into sectors like robotics and self-driving cars.
Constellation Energy stands out, too, as it caters to the rising power needs of AI data centers. Its stock has increased by 136% in the past year, propelled by significant contracts with energy-hungry clients such as Microsoft.
In addition to these top ten positions, the iShares ETF also invests in prominent tech companies like Amazon, Meta Platforms, Microsoft, and Alphabet.
The iShares Future AI and Tech ETF, restructured on August 12, 2024, has achieved a return of 27%, significantly outperforming the S&P 500’s 13% gain in that timeframe. While such limited data makes it hard to draw firm conclusions, it underscores the current strength of AI stocks.
Consultants at PwC estimate that AI may contribute up to $15.7 trillion to the global economy by 2030, while Cathie Wood’s Ark Investment Management suggests it could enhance labor productivity by an astounding $200 trillion. These forecasts imply that the AI market could maintain its momentum for years to come.
However, investors should recognize the potential risks; if the AI sector fails to meet high expectations, significant losses could occur, particularly for leading companies like Broadcom, Nvidia, and Palantir.
This makes it wise for investors to include the iShares ETF as part of a broader and diversified portfolio. If AI continues to thrive, this ETF could provide significant returns, while also protecting your investments should the sector falter.
A Second Chance for Potential Investors
Have you ever felt like you missed out on investing in successful stocks? If so, this could be your chance.
Our analysts occasionally issue a “Double Down” stock recommendation, signaling an opportunity to invest before prices rise. For example:
- Nvidia: Investing $1,000 when we first recommended it in 2009 would yield approximately $336,677 today!*
- Apple: A $1,000 investment from 2008 would now be worth $43,109!*
- Netflix: If you invested $1,000 in 2004, it could grow to $546,804!*
Currently, we’re giving out “Double Down” alerts for three exceptional companies, and this opportunity may not come again soon.
Learn more »
*Stock Advisor returns as of February 3, 2025
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 also on the board. Suzanne Frey, an executive at Alphabet, is similarly involved. Anthony Di Pizio has a neutral stance regarding these stocks. The Motley Fool recommends Advanced Micro Devices, Alphabet, Amazon, Arista Networks, International Business Machines, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Snowflake. Additionally, it recommends Broadcom and Constellation Energy. The Motley Fool implements specific options strategies related to Microsoft. The Motley Fool adheres to a disclosure policy.
The views expressed belong to the author and do not necessarily reflect those of Nasdaq, Inc.
