The AI Boom Is Paying Off. New Research Says S&P 500 Companies Using AI Tools Boost Margins By 1.5% or More. These 2 ETFs Could Be Good Buys Now.

One of the biggest questions in the stock market over the past few years has been: Which companies will be the big winners of the artificial intelligence (AI) boom? Major tech companies have invested hundreds of billions of dollars in building AI models and AI data centers. But many economists and analysts have wondered where exactly the best ROI from AI would develop.

Recent earnings reports are offering some answers -- and they might be good news for the economy. According to new data from 22V Research LLC cited by Bloomberg last Friday, more companies in the S&P 500 index have started to report the impact of AI in their quarterly earnings. The research found that among companies that have quantified the results of AI on their businesses, AI technology is driving average profit margin growth of 1.50% to 1.80%.

This is great news for the AI trade, because it shows that a wide range of companies are adopting AI and using it to drive real results in their businesses' profitability. But it might be even better news for all of us. Research suggests the gains from AI will be widely shared across the economy, with greater productivity and profits for all kinds of companies that use AI tools, not just a few major tech names that build and sell them.

How should you invest now to capitalize on this trend? Consider buying a low-cost S&P 500 index exchange-traded fund (ETF) or small-cap value index fund. Let's look at two funds that could fit this "widely shared AI ROI" strategy.

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State Street SPDR Portfolio S&P 500 ETF: 505 stocks, 5 years of 12.8% annualized returns

Bloomberg's research found that AI profit margin growth is not limited to tech stocks. Instead, AI seems to be delivering benefits to a wide range of S&P 500 companies and industry sectors, including:

• Waste Management: This industrial waste removal company uses AI for its Smart Truck platform, with smarter routing and lower costs of operations.
• Equifax: This credit check company is seeing AI-related cost savings and productivity gains.
• Willis Towers Watson: This corporate consulting firm said it's using process automation to drive $400 million of cost reductions.

These are just a few examples of companies that say they're seeing meaningful gains in profits from AI. They're not tech stocks or AI stocks. They represent a range of industries in the S&P 500. Want to own companies like this? You might want to buy the State Street SPDR Portfolio S&P 500 ETF (NYSEMKT: SPYM).

This S&P 500 ETF gives you exposure to 505 stocks (representing the entire S&P 500) and has delivered average annual returns of about 12.8% for the past five years. It charges an ultra-low expense ratio: 0.02%.

Vanguard Morningstar Small-Cap Value ETF: 840 stocks, 5 years of 9.75% annualized returns

What if the gains from AI tools get spread even further into the economy, beyond the 500 biggest companies? Vanguard research from June projects that U.S. small-cap stocks and value stocks are likely to outperform U.S. growth stocks and large-cap stocks in the next 10 years. That could make the Vanguard Morningstar Small-Cap Value ETF (NYSEMKT: VBR) a better buy.

This small-cap value ETF offers exposure to 840 stocks with a median market cap of $10.5 billion. These are smaller companies in less tech-intensive industries. Only 8.5% of the ETF's portfolio is in technology stocks, while the fund's largest sector holdings are industrials (20.8% of the fund), financials (18.1%), consumer discretionary (14.6%), and real estate (10.2%).

The Vanguard Morningstar Small-Cap Value ETF has delivered average annual returns (by net asset value) of 9.75% for the past five years and 25.75% in the past year. It charges a low expense ratio of 0.05%.

Why buy SPYM or VBR (or both)?

The news that AI is driving profit margin growth is great for investors and, hopefully, for the entire U.S. economy. If you want to invest in a future of widespread growth from AI, buying the State Street SPDR Portfolio S&P 500 ETF is likely a good choice. There's nothing wrong with investing in the top 500 largest publicly traded companies in America.

But if you believe that AI tools will be a rising tide that lifts all (or most) boats in corporate America, buying shares of small-cap companies and value stocks with the Vanguard Morningstar Small-Cap Value ETF could be a smart choice. No one knows which fund will outperform in the future. But owning some small-caps and value stocks, along with large-caps in the S&P 500, seems like a smart way to diversify your portfolio.

Ben Gran has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Equifax. The Motley Fool recommends WM. The Motley Fool has a disclosure policy.