Artificial intelligence has been one of the market’s most powerful investment themes over the past several years, helping propel the so-called Magnificent Seven stocks to enormous gains. While these mega-cap technology companies remain at the center of the AI trade, investors looking for the next wave of opportunities may benefit from looking at Mid-Cap ETFs.
The Invesco S&P MidCap Momentum ETF (NYSEARCA:XMMO), Vanguard Mid-Cap Growth ETF (NYSEARCA:VOT), and iShares Russell Mid-Cap Growth ETF (NYSEARCA:IWP) each provide diversified exposure to mid-cap companies that could benefit as AI adoption expands beyond the largest technology firms.
Mid-Caps Could Benefit from the Next Phase of AI Growth
The first phase of the artificial intelligence boom has been driven largely by companies building the foundational technologies behind AI. While these businesses remain well positioned, the next phase of growth will likely come from broader AI adoption as companies across nearly every industry invest in AI-powered tools to improve productivity and efficiency.
That shift could create opportunities for a wider range of businesses, many of which currently reside in the mid-cap universe. These companies may include firms providing industrial automation, electrical equipment, networking hardware, engineering services, cybersecurity, and enterprise software. Additionally, because many mid-cap companies are earlier in their growth cycle than today’s trillion-dollar technology giants, they may have greater potential to grow earnings and market share over the coming years, creating even more upside potential.
Rather than attempting to identify the next individual AI winner, investors can gain diversified exposure to these emerging opportunities through mid-cap ETFs that own dozens or even hundreds of companies positioned to benefit from AI’s continued expansion.
XMMO: A Momentum Strategy That Evolves with AI Leadership
The Invesco S&P MidCap Momentum ETF (XMMO) is well positioned for investors who believe AI leadership will continue to evolve. Rather than attempting to predict tomorrow’s winners, XMMO follows a momentum-based methodology that automatically shifts toward mid-cap companies demonstrating the strongest recent price performance. As AI spending expands beyond semiconductors and cloud providers, the fund can naturally increase exposure to emerging leaders.
XMMO currently maintains approximately $7.18B in AUM with an expense ratio of 0.35%. The portfolio holds roughly 80 companies, with notable AI-related holdings including Sterling Infrastructure, Inc. (NASDAQ: STRL | STRL Price Prediction), MKS Inc. (NASDAQ: MKSI), and TTM Technologies (NASDAQ: TTMI).
The fund has generated a 21.14% total return over the past year and is up nearly 100% over the past three years, illustrating how its momentum-driven strategy has benefited from identifying emerging market leaders as investment themes evolve.
VOT: A Low-Cost Way to Own Tomorrow’s Growth Leaders
The Vanguard Mid-Cap Growth ETF (VOT) offers a more traditional approach to investing in the next generation of growth companies. By tracking the CRSP U.S. Mid Cap Growth Index, the fund provides broad exposure to businesses with above-average earnings growth prospects, many of which operate in industries expected to benefit from continued AI adoption. For long-term investors, VOT offers a low-cost way to own companies that could eventually become tomorrow’s large-cap market leaders.
VOT currently maintains approximately $19.92B in AUM while charging an expense ratio of just 0.05%. The portfolio contains roughly 125 holdings, with top positions including Vertiv Holdings (NYSEARCA:VRT), Western Digital Corporation (NASDAQ:WDC), and Seagate Technology Holdings.
Although VOT has delivered a more modest 2.68% return over the past year, its longer-term performance remains solid. The fund has gained 41.94% over the past three years, reflecting the strength of its diversified portfolio of growth-oriented mid-cap companies.
IWP: Broad Exposure to Mid-Cap Companies Benefiting From AI
The iShares Russell Mid-Cap Growth ETF (IWP) provides diversified exposure to established mid-cap growth companies that are already benefiting from long-term structural trends, including AI.
Unlike more concentrated strategies, IWP spreads its investments across hundreds of companies involved in software, industrial technology, and communications, making it an attractive option for investors seeking broad participation in AI’s continued expansion.
IWP currently maintains approximately $20.12B in AUM with an expense ratio of 0.23%. The fund owns approximately 274 companies, with top holdings including Datadog Inc. (NASDAQ:DDOG), Snowflake Inc. (NYSEARCA:SNOW), Cloudflare Inc. (NYSEARCA:NET).
Its sector diversification and 40.87% three-year cumulative return demonstrate the fund’s ability to provide broad exposure to many of the industries expected to benefit as AI adoption continues to expand, while also delivering strong long-term returns.
Which ETF Is Best?
Each of these ETFs offers a different approach to investing in the next generation of potential AI leaders. XMMO may appeal to investors seeking a momentum-driven strategy that can adapt as market leadership changes, while VOT offers a low-cost, long-term approach to owning growing mid-cap companies. Meanwhile, IWP provides the broadest diversification of the three, making it an attractive option for investors seeking balanced exposure across multiple industries expected to benefit from continued AI adoption.
| ETF | Investment Style | Best For | Expense Ratio |
| XMMO | Momentum | Investors seeking higher upside potential | 0.35% |
| VOT | Passive Growth | Long-term buy-and-hold investors | 0.05% |
| IWP | Passive Growth | Investors seeking broad diversification | 0.23% |
Looking Ahead: What’s Next for Mid-Cap ETFs Offering AI Exposure
While the Magnificent Seven are likely to remain major beneficiaries of the AI revolution, the next phase of growth may extend well beyond today’s largest technology companies. As businesses across industries adopt AI-powered technologies, diversified mid-cap ETFs could offer investors an opportunity to participate in the next generation of market leaders while reducing reliance on a handful of mega-cap stocks
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