ETFs
2 Artificial Intelligence (AI) ETFs to Buy Now and Hold for Decades
Artificial intelligence could add $15 trillion in economic value to the global economy.
The hype around artificial intelligence (AI) has accelerated over the past 18 months. Although AI has been around for years, recent advances in technology mean that AI is still in its infancy in terms of investment potential.
Investors should expect many more changes in the coming years, with some companies moving into the spotlight while others fade away, unable to keep pace with the competition. Many investors interested in this sector are therefore wondering how to identify winning AI stocks that will remain winners in the long term.
Exchange Traded Funds (ETFs), which are groups of individual stocks that trade under a single ticker symbol, could be the answer. The diversification they offer means you don’t need to pick specific winners, which benefits investors looking to enjoy the benefits of artificial intelligence (AI).
Here are two AI-related ETFs that you can easily buy and hold for decades.
A great gem with a proven track record
The Invesco QQQ Trust (QQQ -0.09%) does not present itself as an AI fund, but its “DNA” could make it the most reliable AI ETF money can buy. He follows the Nasdaq-100. This index is highly technological; about 60% of its stocks come from the technology sector. The remainder is primarily healthcare and consumer discretionary stocks.
More importantly, the ETF’s top holdings are already major players in the AI sector. Names like Microsoft, Nvidia, AmazonAnd Metaplatforms are among the top five, representing 26% of its total value. These large technology companies are major players in AI-related areas like semiconductor chips (Nvidia), cloud computing (Microsoft and Amazon), and the metaverse (Meta Platforms). This is excellent exposure to AI from companies that are already fundamentally strong.
The fund has already shown strong results; the Invesco QQQ easily outperformed the S&P500 and the Nasdaq Composite during the last decade:
QQQ total return price data by Y Charts
There’s no guarantee its outperformance will continue indefinitely, but betting on the world’s biggest tech companies has paid off. Since these same companies are already at the forefront of the AI sector, it seems like a good idea to continue riding these horses for long-term growth.
A more concentrated AI fund with high upside potential
Investors who are feeling a little more adventurous might find an ETF specifically dedicated to AI interesting. THE Roundhill Generative AI and Technology ETF (CAT -0.59%), launched in May 2023, aims to deliver long-term outperformance with a strong focus on generative AI and its growth potential. The big difference between this ETF and the Invesco QQQ is that it does not track an index. The fund managers of the Roundhill Generative AI & Technology ETF actively and regularly buy and sell positions.
The potential benefit of an actively managed fund is that smart investment decisions can generate massive returns. Right now, fund managers are bullish on Nvidia (the ETF’s largest holding, at over 14%) and Microsoft (the second largest, at over 10%). The fund currently has 50 securities. The risk is that poor decisions by these managers could undermine investor returns.
So far, the Roundhill Generative AI & Technology ETF has performed well, outperforming the S&P 500 and the Nasdaq Composite since its inception:
CAT Total return price data by Y charts.
Actively managed ETFs often charge higher fees than passively managed funds. THE spending rate for this one is 0.75%, significantly higher than the 0.2% of the Invesco QQQ. These fees effectively put this ETF on par with the Nasdaq Composite in terms of performance (so far). Still, high fees won’t matter as much if investment returns are high enough for long enough.
Ultimately, either fund could benefit long-term investors. According to a PwC forecast, the global economic impact of AI could amount to more than $15 trillion per year by 2030. In this scenario, investors who invest in this trend will likely do well. very good, whatever fund they have.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Amazon, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Mad Motley has a disclosure policy.