There’s no denying the prowess of technology stocks in driving market surges. Over the last decade, the tech-heavy Nasdaq Composite index has notably outpaced the broader S&P 500. The Nasdaq-100, which monitors 100 of the largest nonfinancial stocks on the Nasdaq, has more than doubled the S&P 500’s returns in the same period:
The rise of artificial intelligence (AI) is poised to widen the gap between the technology sector and the rest of the market. AI is expected to permeate nearly every sector of the economy, presenting a significant opportunity for every tech company engaged in its advancement.
While picking winners and losers in this nascent industry can be tricky, investors need not fret. Exchange-traded funds (ETFs) provide exposure to the AI revolution while mitigating risk. Let’s delve into how the iShares Semiconductor ETF (NASDAQ: SOXX) and the iShares Robotics and Artificial Intelligence Multisector ETF (NYSEMKT: IRBO), could potentially transform a $100,000 investment into $1 million over the next three decades.
1. iShares Semiconductor ETF (SOXX)
The iShares Semiconductor ETF is an enticing option for investors seeking a slice of the rapid technological evolution without betting on a single chip company winning the AI race. The fund boasts 35 diverse stocks and securities, with its top five positions accounting for 39.9% of its total portfolio value:
|
Stock |
iShares Semiconductor ETF Weighting |
|---|---|
|
Advanced Micro Devices |
9.92% |
|
Broadcom Inc |
8.86% |
|
Nvidia |
8.78% |
|
Qualcomm Inc |
6.41% |
|
Intel Corporation |
5.93% |
Data source: iShares. Portfolio weightings are accurate as of Jan. 25, 2024, and are subject to change.
The SOXX ETF delivers a compound annual return of 24.4% over the last decade, more than twice the average annual return of the S&P 500 index since its inception in 1957.
2. iShares Robotics and Artificial Intelligence Multisector ETF (IRBO)
The inclusivity of the iShares Robotics and Artificial Intelligence Multisector ETF excels, aiming to track companies benefitting from AI across industries. Holding 135 different stocks and securities, the fund’s top 10 holdings account for just 11.1% of its total portfolio value, encompassing familiar names in the AI sphere:
|
Stock |
iShares Robotics and AI Multisector ETF Weighting |
|---|---|
|
1. Advanced Micro Devices |
1.32% |
|
2. Nvidia |
1.16% |
|
3. Meta Platforms |
1.11% |
|
4. Alphabet (Google) |
1.09% |
|
5. Silicon Laboratories |
1.09% |
|
6. Alchip Technologies |
1.08% |
Exploring the Potential of Investing in AI and Semiconductor ETFs for Long-Term Growth
The landscape of the tech industry is continually evolving, and investors are constantly seeking opportunities to capitalize on emerging trends such as artificial intelligence (AI) and semiconductor technologies. Two exchange-traded funds (ETFs), namely iShares Semiconductor ETF (SOXX) and iShares Robotics and AI ETF (IRBO), have been exhibiting remarkable performance metrics, prompting closer examination of their potential for long-term investment gains.
Performance and Historical Context
Since its inception in July 2001, the SOXX ETF has delivered a compound annual return of 11.1%, including dividend distributions. Meanwhile, the IRBO ETF, established in June 2018, has achieved a compound annual return of 8%, inclusive of dividend distributions. Though the historical returns of these ETFs are noteworthy, it is important to recognize the broader historical context of the tech industry’s growth.
Long-Term Investment Potential
If an investor were to allocate $100,000 equally between SOXX and IRBO and hold onto the investment for 30 years, the initial sum could potentially grow to over $1.6 million, based on the assumption that both ETFs continue to match their historical average returns. These figures represent the long-term growth potential of AI and semiconductor technologies, which align with forecasts by prominent investors such as Cathie Wood’s Ark Investment Management, projecting a substantial $200 trillion addition to the global economy by 2030 through AI advancements.
|
ETF |
Average Annual Return |
Initial Investment |
End Balance After 30 Years |
|---|---|---|---|
|
iShares Semiconductor ETF (SOXX) |
11.1% |
$50,000 |
$1,166,468 |
|
iShares Robotics and AI ETF (IRBO) |
8% |
$50,000 |
$510,167 |
|
Total |
$100,000 |
$1,676,635 |
As the AI industry matures, both ETFs present diversified and compelling opportunities to partake in the AI revolution without having the complexity of selecting individual stocks. This quality alone makes them an attractive proposition for any investor seeking exposure to AI technologies.