Investing in AI? Consider This ETF Amid Market Volatility

The Nasdaq Composite (NASDAQINDEX: ^IXIC) index encompasses nearly all companies listed on the Nasdaq Stock exchange, emphasizing many technology-driven firms. Leading players in this cohort have been at the forefront of artificial intelligence (AI), yielding impressive stock returns over the previous years.

Last year, the index achieved a notable gain of 28.6%. However, it has recently entered correction territory, declining 13.4% from its peak. For investors, this pullback may offer a compelling opportunity to purchase high-performing tech innovators at discounted prices. Instead of selecting specific stocks, consider investing in an AI-focused exchange-traded fund (ETF).

Where to invest $1,000 right now? Our analyst team has identified the 10 best stocks to buy in the current market. Learn More »

Introducing the iShares Future AI and Tech ETF

The iShares Future AI and Tech ETF (NYSEMKT: ARTY) debuted in 2018 under a different name but was restructured in August of last year to focus exclusively on companies leading the AI space, including those involved in software, data solutions, and infrastructure development.

This ETF has recently dropped 20.6% from its high reached just three weeks prior, making shares available for less than $40 each.

Image source: Getty Images.

AI Leaders Gathered in One ETF

While ETFs may comprise hundreds or thousands of stocks, the iShares Future AI and Tech ETF maintains a concentrated selection of just 50 companies. This concentration exposes investors to potential volatility, especially in uncertain markets. Therefore, it’s wise to include this fund in a diversified portfolio along with other investments.

The ETF’s top 10 holdings represent some of the most prominent firms in AI hardware and software:

Stock	iShares ETF Portfolio Weighting
1. Broadcom	5.00%
2. Super Micro Computer	4.94%
3. Nvidia	4.05%
4. Arista Networks	4.01%
5. Advanced Micro Devices	3.88%
6. Palantir Technologies	3.66%
7. Dassault Systemes	3.57%
8. International Business Machines	3.57%
9. Cognizant	3.39%
10. Vertiv Holdings	3.33%

Data source: iShares. Portfolio weightings are accurate as of March 6, 2025, and are subject to change.

Broadcom is a versatile AI hardware company, creating custom AI accelerators for major clients like Alphabet. It also manufactures leading data center networking equipment, such as the Tomahawk switches, which optimize data transmission speeds. Recently, Broadcom reported a 77% year-over-year increase in AI revenue, totaling $4.1 billion in its latest quarter, ending February 2.

Nvidia, known for its dominant data center chips, continues to innovate with its new Blackwell-based GB200 graphics processing unit (GPU). Broadcom’s ability to customize AI accelerators for various workloads presents a potential challenge to Nvidia’s market share as demand for expansive clusters is expected to surge by 2027.

This underscores the advantage of investing in an ETF. Investors don’t have to stress over selecting winning stocks; the fund is designed to perform well based on the strength of the entire sector.

Additionally, Palantir Technologies is noteworthy. The company achieved an impressive 340% stock gain in the AI market last year but has since faced a decline from its peak. Through its innovative software, Palantir assists organizations in extracting actionable insights from vast datasets, leading to heightened demand last year.

Beyond its ten major holdings, the iShares ETF includes several other AI frontrunners, such as Amazon, Microsoft, Alphabet, Meta Platforms, C3.ai, Oracle, and others.

The Benefits of Adding the iShares ETF to Your Portfolio

Although the iShares ETF is relatively new—having been restructured on August 12—its performance has been promising, yielding a 6.1% return, compared to a 5.1% gain in the S&P 500 during the same timeframe.

The AI industry remains in its infancy, with much potential for growth. Nvidia CEO Jensen Huang has indicated that future AI models will require significantly more computing power, potentially 100 times greater than current versions. This suggests a prolonged boom in AI semiconductors and infrastructure.

Major companies like Meta Platforms, Alphabet, Microsoft, and Amazon plan to invest over $300 billion combined in hardware infrastructure throughout 2025. This anticipated expenditure could greatly benefit firms included in the iShares ETF, such as Nvidia, Broadcom, and Advanced Micro Devices.

The investments from these tech giants are based on the expectation of returns, which may lead to substantial revenue growth in AI cloud and software sectors.

Consequently, the iShares ETF represents an excellent opportunity for investors looking to diversify their holdings within the transformative AI industry. Incorporating it into a well-rounded portfolio may enhance long-term returns while shielding against risks if AI fails to meet forecasts.

Seize This Opportunity Before It’s Too Late

Do you feel like you’ve missed the chance to invest in market-leading stocks? This might be your moment.

Our expert analysts occasionally issue a “Double Down” Stock recommendation for companies poised for significant growth. If you think you’ve waited too long, now might be the prime time to invest before opportunities dwindle. Here’s a glimpse of past successes:

• Nvidia: Invested $1,000 when we doubled down in 2009 would now be worth $292,207!*
• Apple: A $1,000 investment from our 2008 recommendation would have grown to $45,326!*
• Netflix: Investing $1,000 when we doubled down in 2004 would now amount to $480,568!*

At this moment, we’re providing “Double Down” alerts for three exceptional companies, and opportunities like this may not come often.

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*Stock Advisor returns as of March 10, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board. Likewise, Randi Zuckerberg, former Facebook marketing director and sister to Meta Platforms CEO Mark Zuckerberg, is also on the board. Suzanne Frey, an executive at Alphabet, serves on the board as well. Anthony Di Pizio holds no positions in mentioned stocks. The Motley Fool has positions in, and recommends, Advanced Micro Devices, Alphabet, Amazon, Arista Networks, International Business Machines, Meta Platforms, Microsoft, Nvidia, Oracle, and Palantir Technologies. They also recommend Broadcom, C3.ai, Cognizant Technology Solutions, and Nasdaq, alongside certain options on Microsoft. The Motley Fool maintains a detailed disclosure policy.

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