One of the best uses of index funds is to learn about areas of the stock market that you want to invest in but may not be entirely comfortable picking individual stocks on your own.
There is no doubt about that artificial intelligenceor artificial intelligence, is one of the most interesting and promising investment opportunities of our time. But selecting individual winners can seem like an intimidating task.
One of the biggest problems is that AI ETFs — and there are a few of them — tend to have relatively high investment fees. But there is a Vanguard ETF that can give you excellent exposure to AI at a fraction of the cost of most other AI ETFs – Vanguard Information Technology ETF(recent sample: vgt).
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Technically, the Vanguard Information Technology ETF is not an AI-specific investment vehicle. Instead, it is a sector index fund that tracks information technology, one of 11 Standard & Poor’s sectors.
However, the bulk of the companies in the portfolio are major players in the AI space. For example, semiconductor manufacturers make up 31% of the fund, and software companies make up another 36%. If we look at the list of the fund’s 10 largest holdings (which constitute 58% of assets), except perhaps apple(Nasdaq: Apple)reads like a “who’s who” of the biggest AI winners on the market.
Company (code)
% of the fund
Nvidia(Nasdaq: NVDA)
17.18%
Microsoft(NASDAQ:MSFT)
13.73%
apple(Nasdaq: Apple)
13.05%
Broadcom(NASDAQ:AFGO)
4.32%
oracle(NYSE: Oracle)
2.02%
Palantir(NASDAQ:PLTR)
1.86%
cisco(Nasdaq: Cisco)
1.50%
AMD(NASDAQ:AMD)
1.44%
Salesforce.com(NYSE: CRM)
1.32%
International Business Machines(NYSE: IBM)
1.23%
Data source: Vanguard. Holdings until August 31, 2025.
Like most Vanguard ETFs, the Vanguard Information Technology ETF is a low-cost investment product. The expense ratio is 0.09%, which means that for every $1,000 in assets, you will pay $0.90 in investment fees annually. Granted, this isn’t a fee you actually have to pay, but it will be reflected in the fund’s performance over time.
Here’s why this is so important. All of the most popular AI ETFs have much higher expense ratios. For example, GlobalX Artificial Intelligence and Technology Corporation is publicly traded(NASDAQ: AIQ) It has an expense ratio of 0.68%. Over a long holding period, this difference in fees could mean literally thousands of dollars in additional returns.
To illustrate this, let’s assume that stocks owned by both funds return an average of 12% per year over the next 20 years, and that you invest $10,000 in each. A fund with an expense ratio of 0.68% would grow your money to about $85,400. A Vanguard fund with an expense ratio of 0.09% would produce more than $9,500 more.
It’s also worth noting that the reasons to buy the Vanguard Information Technology ETF are also reasons to be cautious — especially when it comes to concentration in the largest technology companies. Roughly 45% of the fund is concentrated in Nvidia, Microsoft, and Apple, so if any of those three have a bad earnings report or other negative news, it could have a significant impact on the fund. Just keep that in mind before you invest.
The bottom line is that the Vanguard Information Technology ETF is an excellent way to get comprehensive exposure to the biggest and most successful names in AI with minimal investment fees. If you’re looking for ways to profit from the AI boom without picking individual stocks yourself, this could be a great way to do so.
Before you buy shares in the Vanguard Information Technology ETF, consider the following:
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Matt Frankel He has positions in advanced micro-instrumentation. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Cisco Systems, International Business Machines, Microsoft, Nvidia, Oracle, Palantir Technologies, and Salesforce. The Motley Fool recommends Broadcom and recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has Disclosure policy.
