ETFs
3 Gorgeous Vanguard ETFs to Buy, Filled with Leading Artificial Intelligence (AI) Stocks
If you want to benefit from AI without picking individual AI stocks, these ETFs might be right for you.
How to invest in artificial intelligence (AI) without having to select AI-specific stocks? It’s simple: buy an exchange-traded fund (ETF) with a high concentration in AI stocks.
Vanguard has long been a favorite among investors because of its low-cost funds. The investment firm doesn’t offer any ETFs focused purely on AI. However, here are three great Vanguard ETFs to buy that are loaded with the best AI stocks.
1. Vanguard Information Technology Index Fund ETF
Arguably the closest thing to a pure AI fund at Vanguard is its Vanguard Information Technology Index Fund ETF (VGT -0.04%). As the name suggests, this ETF focuses on information technology (IT) stocks.
The Vanguard Information Technology Index Fund ETF currently holds 321 U.S. technology stocks. Five AI stocks make up nearly 53% of the fund’s portfolio: Microsoft, Apple, Nvidia, BroadcomAnd Advanced microsystems.
You won’t have to pay full price for this ETF. annual spending rate is just 0.1% compared to an average expense ratio of 0.97% for similar funds not offered by Vanguard.
Over the past five years, the Vanguard Information Technology Index Fund ETF has generated an average annual return of 23.5%. Since its inception in January 2004, the ETF’s average annual return is 13.25%.
The main drawback of buying this ETF is its valuation. The average stock in the fund has a tracking value price/earnings ratio (P/E) of 35.6. There is some good news, though. The stocks held by this Vanguard ETF have generated average annual earnings growth of 23% over the past five years. Many of them should have solid growth prospects going forward, making the ETF’s valuation less scary.
2. ETF Vanguard Mega Cap Growth Index
THE market capitalizations of major AI stocks have skyrocketed. This means that Vanguard Mega Cap Growth Index Fund (MGK -0.88%) holds many AI leaders with a focus on the largest US growth stocks.
The Vanguard Mega Cap Growth Index Fund ETF holds 79 stocks with a median market cap of $1.8 trillion. Eight of its top 10 holdings are AI stocks: Microsoft, Apple, Nvidia, Amazon, Metaplatforms, Alphabet Class A, alphabetical class C and You’re hereThese stocks represent almost 60% of the ETF’s portfolio.
This Vanguard ETF also has a low annual expense ratio of 0.07%, well below the 0.95% average of similar funds. It has generated an average annual return of 20.03% over the past five years and 12.73% since the fund’s inception in December 2007.
Like the Vanguard Information Technology Index Fund ETF, the Vanguard Mega Cap Growth Index Fund ETF has a high valuation. The average price-to-earnings ratio of the mega-cap stocks in its portfolio is 38.
3. Vanguard S&P 500 Growth Index ETF
Investors looking to gain exposure to AI might also appreciate the Vanguard S&P 500 Growth Index Fund (VOOG -0.87%). This ETF holds growth stocks that are part of the S&P500 hint.
This Vanguard ETF holds 229 stocks with a median market cap of $1.2 trillion. Nine of its top 10 holdings are AI stocks: Microsoft, Apple, Nvidia, Amazon, Meta, Alphabet Class A, Alphabet Class C, Broadcom, and Tesla. These nine stocks represent 57.5% of the fund’s total portfolio.
The annual expense ratio of the Vanguard S&P 500 Growth Index Fund ETF is 0.1%, much lower than the average expense ratio of 0.95% of similar funds. The ETF has generated an average annual return of 16.59% over the past five years and 15.72% since its inception in September 2010. It is also the best performing ETF in the Vanguard family so far. ‘now in 2024.
You can probably guess the main drawback of this Vanguard ETF. It’s the same thing as the other two ETFs on our list: valuation. However, the Vanguard S&P 500 Growth Index Fund ETF is a bit cheaper with a P/E ratio of 33.9. If the AI boom continues, this ETF should continue its momentum.
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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 call on Microsoft and short January 2026 $405 call on Microsoft. The Motley Fool has a position in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 call on Microsoft and short January 2026 $405 call on Microsoft. disclosure policy.