Info know-how is the most important of 11 sectors within the S&P 500, with a weighting of 33.9%. That is partly as a result of the sector is house to the world’s three most precious firms: Nvidia, Microsoft, and Apple, which have a mixed market capitalization of $11 trillion.
They’ve every obliterated the return of the S&P 500 over the previous decade:
NVDA information by YCharts
Traders who have not owned these three tech titans have most likely underperformed the broader market. Nonetheless, they don’t seem to be the one high-flying shares within the data know-how sector, and there is a easy approach to purchase all of them.
The Vanguard Info Expertise ETF (VGT -0.98%) is an exchange-traded fund (ETF) that invests solely in data know-how shares. It outperformed the S&P 500 yearly, on common, because it was established in 2004, and it is on monitor to take action once more in 2025.
Picture supply: Getty Photographs.
The world’s most dominant tech shares packed into one low-cost ETF
The Vanguard ETF is not restricted to the data know-how shares inside the S&P 500 alone — it invests throughout all the sector. It holds 319 shares from 12 data know-how subsegments together with semiconductors, techniques software program, and software software program.
The semiconductor section is the most important by far with a weighting of 30.4%, which should not be a shock contemplating information heart {hardware} is on the coronary heart of the substitute intelligence (AI) increase. Nvidia’s market capitalization not too long ago topped $4.2 trillion due to the large demand for its information heart chips, and even Broadcom has develop into a trillion-dollar large due to its AI {hardware} gross sales.
However the AI theme is prevalent all through all the data know-how sector. In truth, every of the highest 10 holdings within the Vanguard ETF — which symbolize 58.8% of the worth of its portfolio — is collaborating within the AI race.
Inventory
Vanguard ETF Portfolio Weighting
1. Nvidia
16.74%
2. Microsoft
14.89%
3. Apple
13.03%
4. Broadcom
4.57%
5. Oracle
2.05%
6. Palantir Applied sciences
1.64%
7. Cisco Methods
1.58%
8. Worldwide Enterprise Machines
1.56%
9. Salesforce
1.47%
10. Superior Micro Gadgets
1.31%
Knowledge supply: Vanguard. Portfolio weightings are correct as of June 30, 2025, and are topic to alter.
Microsoft and Oracle are two of Nvidia’s largest clients. They function a rising variety of information facilities fitted with 1000’s of AI chips, they usually lease the computing capability to companies and builders for revenue. Microsoft, nonetheless, has additionally develop into a frontrunner in AI software program due to its Copilot digital assistant, which is built-in into every of its hottest merchandise together with Home windows and 365 (Phrase, Excel, and PowerPoint).
Palantir is one other AI software program powerhouse. It operates three core platforms: Gotham and Foundry assist companies and governments extract actionable insights from their information, and AIP (Synthetic Intelligence Platform) helps them combine AI into their on a regular basis workflows. Outstanding tech analyst Dan Ives from Wedbush Securities believes Palantir’s valuation might soar by 177% to achieve $1 trillion inside the subsequent three years, as enterprises race to show their information into {dollars}.
Exterior of its prime 10 holdings, the Vanguard ETF holds numerous different distinguished AI software program shares. They embody AI cybersecurity giants Palo Alto Networks and CrowdStrike, plus Adobe, and Snowflake, to call only a few.
The most effective half concerning the Vanguard ETF may be its ultra-low price. It has an expense ratio of simply 0.09%, so a $10,000 funding would incur an annual charge of simply $9. Vanguard says competing funds throughout the business cost a mean of 0.93%, so they’re a whopping 10 occasions dearer to personal.
On target to beat the S&P 500 once more in 2025
The Vanguard Info Expertise ETF generated a compound annual return of 13.7% since its inception in 2004, handily beating the S&P 500 which has returned a mean of 10.1% per yr over the identical interval.
That pattern appears set to proceed in 2025, as a result of the ETF was sitting on a year-to-date achieve of 10.3% as of market shut July 18, whereas the S&P was sitting on a lesser achieve of seven.3%. Tech shares are having yet one more stellar yr due to AI, with shares of Microsoft, Nvidia, and Palantir up 21%, 24%, and 104%, respectively.
However traders ought to by no means put all of their eggs in a single basket. If the AI increase falters, these high-flying shares might undergo steep corrections which could lead the data know-how sector to briefly underperform the remainder of the market. Because of this, this Vanguard ETF ought to solely be added to a diversified portfolio to mitigate threat.
That technique can nonetheless drive unimaginable returns if issues go properly. An investor who positioned $20,000 within the S&P 500 in 2004 can be sitting on $167,000 in the present day. However had they break up the $20,000 equally and positioned $10,000 within the S&P 500 and $10,000 within the Vanguard ETF, they’d have $264,800 in the present day. That is a life-changing distinction for most individuals.
Anthony Di Pizio has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Adobe, Superior Micro Gadgets, Apple, Cisco Methods, CrowdStrike, Worldwide Enterprise Machines, Microsoft, Nvidia, Oracle, Palantir Applied sciences, Salesforce, and Snowflake. The Motley Idiot recommends Broadcom and Palo Alto Networks and recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
