Investing Artificial Intelligence Exchange-Traded Funds: A Smart Move for $1,000
The Invesco QQQ Trust (QQQ) offers a unique opportunity for investors interested in the artificial intelligence (AI) trend. This exchange-traded fund (ETF) provides a concentrated index, focusing on tech-driven themes such as e-commerce, digital payments, digital advertising, streaming entertainment, and, most notably, AI.
The QQQ tracks the performance of the Nasdaq-100, a collection of the 100 biggest nonfinancial companies that trade on the Nasdaq exchange. Notably, these companies operate the largest cloud computing platforms in the world, helping to build infrastructure for AI applications.
The QQQ's top positions indicate significant exposure to AI. Among the top 10 largest holdings are companies like Microsoft and Alphabet (Google), which play significant roles in artificial intelligence development. Microsoft plans to invest around $30 billion by 2028 in AI infrastructure, while Google committed nearly $7 billion over two years to related AI investments in the UK.
One of the standout holdings in the QQQ is Nvidia, accounting for 10.2% of the ETF. Nvidia has seen a remarkable growth of 1,490% in the past five years (as of Aug. 5).
In the last 10 years, the QQQ has generated a total return of 447%, with an annualized gain of 18.5%. This performance outperforms an ETF that tracks the S&P 500 and the Ark Innovation ETF, run by Cathie Wood, which focuses on "disruptive innovation" but has underperformed the QQQ in the last 10 years.
The Ark Innovation ETF's expense ratio of 0.75% is nearly four times that of the QQQ's 0.20%. A $1,000 investment in August 2015 would be worth $5,470 today in the Invesco QQQ Trust, demonstrating its potential for long-term growth.
In conclusion, the Invesco QQQ Trust is a passive approach to investing in the AI trend, offering a more concentrated index than the S&P 500. For those who want to bet on AI, the QQQ is a suitable investment option that provides diversified exposure to the most powerful secular theme in recent years. Investors should, however, understand that the QQQ provides a lot of exposure to the AI trend and make their decisions accordingly. The QQQ is a wonderful choice for investors who want to invest in AI and reap the benefits of its growth potential.
