Artificial intelligence has been one of the predominant forces moving markets over the past several years. While massive gains have left some investors wondering whether they have missed the opportunity, AI adoption remains in its early innings, with businesses continuing to invest heavily in the infrastructure needed to support the technology.
That said, investors do not necessarily need to pick the next winning AI stock to benefit from this trend. ETFs such as the Vanguard Information Technology ETF (VGT), VanEck Semiconductor ETF (SMH), and Global X Artificial Intelligence ETF (AIQ) offer diversified exposure to varying parts of the AI landscape.
From manufacturers of semiconductors to companies dealing in cloud computing, software development, and AI automation, these ETFs provide diversified ways to participate in the next phase of AI-driven growth.
Why AI still Has Room to Run
Despite the strong rally in AI-related stocks, the long-term investment opportunity may still be in its early stages. This is supported by research from Morgan Stanley that estimates that more than 80% of the nearly $3 trillion in AI infrastructure investment expected through 2028 has yet to occur, suggesting significant spending remains ahead.
This spending is expected to benefit a large range of companies across the AI landscape, ranging from semiconductor manufacturers, software companies, and more.
Rather than trying to identify the next winning AI stock, the following ETFs can be used to gain diversified exposure to this long-term trend while also reducing single-stock risk.
Vanguard Information Technology ETF (VGT)
The Vanguard Information Technology ETF (VGT) provides broad exposure to many of the companies driving AI adoption. Of its 326 current holdings, top names include Nvidia (NVDA), Microsoft (MSFT), Micron (MU), and Broadcom (AVGO).
While VGT is not exclusively an AI fund, its diverse holdings provide exposure to cloud computing, semiconductors, enterprise software, and network infrastructure, all industries expected to grow as AI continues to expand.
With an expense ratio of just 0.09%, VGT provides an affordable way for investors to participate in the long-term adoption of artificial intelligence.
VanEck Semiconductor ETF (SMH)
For investors seeking more concentrated AI exposure, the VanEck Semiconductor ETF (SMH) focuses on the companies building the chips that power AI. The fund currently has 26 total holdings, including companies such as Nvidia (NVDA), Taiwan Semiconductor (TSM), Micron (MU), and Intel (INTC).
Nvidia alone makes up 17.55% of total holdings.
Although SMH has proven to be more volatile than broader technology funds, continued demand for AI infrastructure and advanced computing could support long-term growth for the industry.
While SMH is slightly more costly than VGT, with an expense ratio of 0.35%, the fund provides an industry-specific approach to capitalize on the growing AI trend and need for advanced compute.
Global X Artificial Intelligence & Technology ETF (AIQ)
The Global X Artificial Intelligence & Technology ETF (AIQ) offers targeted exposure to companies developing and deploying AI technologies.
With current total holdings of 93 companies, its portfolio spans software, cloud computing, semiconductors, and automation, providing pure AI exposure.
Similar to SMH, when compared to broad technology ETFs, the fund carries a slightly higher expense ratio of 0.68%. That said, AIQ may appeal to investors seeking a more direct way to invest in AI without concentrating their portfolio in just a handful of semiconductor names.
Which ETF is Best?
Which ETF is best ultimately depends on each investor’s goals and risk tolerance.
For long-term investors looking to develop a core technology holding, the Vanguard Information Technology ETF (VGT) stands out as the strongest all-around option. As is the case, the fund combines diversified exposure to many of the largest AI beneficiaries while maintaining a low expense ratio.
For investors specifically targeting AI infrastructure and potentially higher volatility/ growth potential, the VanEck Semiconductor ETF (SMH) may be worth keeping an eye on, as the fund specifically provides concentrated exposure to chipmakers.
Furthermore, the Global X Artificial Intelligence & Technology ETF (AIQ) offers the most targeted AI exposure but comes with a higher expense ratio.
Together, these funds provide three distinct ways to capitalize on the continued expansion of the ongoing AI rally.
| ETF | Expense Ratio | # of Holdings | AUM | Top Holding | Use Case |
| VGT | 0.09% | 326 | $146.58B | Nvidia | Core long-term tech holding that stands to benefit from the increased adoption of AI |
| SMH | 0.35% | 26 | $70.83B | Nvidia | Aggressive growth given current demand for chips |
| AIQ | 0.68% | 93 | $9.81B | SK Hynix | Dedicated exposure that aims to fully encompass all aspects of the AI landscape |
Final Takeaway
While no investment is without risk, AI continues to create long-term opportunities for investors willing to ride out the volatility.
Whether investors prefer broad technology exposure, semiconductor leadership, or a dedicated AI strategy, these ETFs offer a diversified way to participate in the next phase of AI-driven growth.
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