BlackRock (NYSE: BLK) oversees more than $11.6 trillion worth of client money, making it the largest asset manager in the world. Around $3.5 trillion of that is invested in exchange-traded funds (ETFs) which are operated by its iShares subsidiary.
ETFs can hold hundreds or even thousands of individual stocks. They can help investors gain exposure to a specific sector of the market like artificial intelligence (AI), which is really useful because picking the individual winners and losers in a new industry is extremely challenging.
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iShares offers more than 1,400 different ETFs. One of them is the iShares U.S. Tech Independence Focused ETF (NYSEMKT: IETC), and more than 40% of its portfolio (by value) is invested in just five AI powerhouses.
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This ETF has a unique objective
The objective of the iShares U.S. Tech Independence Focused ETF isn't necessarily to invest in AI stocks. Instead, it invests in tech companies which develop most of their technologies, generate most of their revenue, and produce most of their products inside American borders.
However, it just so happens that most U.S. tech companies have turned their attention to AI, so the ETF holds a great mix of stocks which can help investors profit from this new technological revolution.
The ETF currently holds 120 different stocks, but its top five positions alone account for 40.6% of the total value of its portfolio. Each of them is a dominant force in the AI race:
|
Stock |
iShares ETF Portfolio Weighting |
|---|---|
|
1. Broadcom |
12.52% |
|
2. Amazon |
8.86% |
|
3. Nvidia |
7.68% |
|
4. Microsoft |
7.09% |
|
5. Palantir Technologies |
4.45% |
Data source: iShares. Portfolio weightings are accurate as of Jan. 30, 2025, and are subject to change.
Nvidia is the top supplier of graphics processors (GPUs) for data centers, which are used in AI development. However, Broadcom (NASDAQ: AVGO) makes custom AI accelerators (a type of chip) for tech giants like Alphabet, which helps them internalize their hardware requirements so they don't have to rely entirely on Nvidia. Broadcom also sells a range of data center networking components critical for processing AI workloads.
Nvidia and Broadcom are both growing rapidly. Nvidia (NASDAQ: NVDA) just wrapped up its fiscal year 2025 on Jan. 31, and the company's guidance suggests its revenue soared by 112% year over year (it will release its official results later this month). Broadcom, on the other hand, delivered a whopping 220% increase in its AI revenue during its fiscal year 2024.
Amazon and Microsoft both developed their own AI virtual assistants. The companies are also home to the world's largest cloud computing platforms, Amazon Web Services and Microsoft Azure, which is where businesses access the state-of-the-art data center computing capacity and ready-made models they need to build their own AI software.
Palantir was one of the hottest stocks in America last year (more on that in a moment). The company developed AI-powered platforms to help enterprises and government departments analyze high volumes of data, and make accurate decisions in real time.
Outside of its top five positions, the iShares ETF holds other leading AI stocks like Apple, Oracle, Alphabet, Palo Alto Networks, and more.
The iShares ETF crushed the S&P 500 last year
The iShares ETF soared by 37.4% during 2024, far outpacing the total return (including dividends) of 25% in the S&P 500. The strong performance was partially driven by the staggering average gain of 135% in the ETF's current top five positions, led by Palantir:
But the iShares ETF is no stranger to beating the S&P. It has delivered a compound annual return of 20.9% since it was established in 2018, crushing the average annual gain of 13.8% in the index over the same period.
It's unrealistic to expect any fund to deliver a return of more than 20% per year in perpetuity because the fastest-growing companies eventually hit a wall once they penetrate most of their addressable market. Plus, if Broadcom (the largest holding in the ETF) grew by 20% per year for the next 20 years, its market capitalization would exceed $38 trillion, which is bigger than the annual output of the entire U.S. economy.
But the AI revolution is still in the very early innings, so there is plenty of potential growth on the table. PwC thinks AI will add $15.7 trillion to the global economy by 2030, whereas Cathie Wood's Ark Investment Management pegs that number at a whopping $200 trillion.
No matter which estimate proves to be accurate, a lot of that value will be created by the companies in the iShares ETF. Of course, there is also a risk that AI fails to live up to expectations, so investors should own this ETF as part of a balanced portfolio of other funds and individual stocks.
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Suzanne Frey, an executive at Alphabet, 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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, Oracle, and Palantir Technologies. The Motley Fool recommends Broadcom and Palo Alto Networks and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
