Are You Missing Out on the Top-Performing AI ETF?

Key Points

• This AI-oriented ETF has beaten the S&P 500 and Nasdaq since its inception.

• It's diversified across the core AI stocks as well as AI-adjacent industries.

• But it has still underperformed QQQ and the higher-growth Nasdaq-100 index.

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The rapid expansion of the artificial intelligence (AI) market lit a blazing fire under many of the tech sector's top stocks. Two of the biggest winners were Nvidia, which supplies the data center GPUs for processing those complex AI tasks, and Microsoft, which owns a big stake in ChatGPT's creator OpenAI.

Other stocks that were driven higher by the AI boom include Oracle, which supports those AI services with its cloud infrastructure platform; Broadcom, which supplies infrastructure chips for AI-oriented data centers; and Meta Platforms, which uses AI to craft better targeted ads across its social media apps.

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All of those blue chip tech stocks are still reliable long-term investments. But if you want some balanced exposure to the AI market without buying individual stocks, you should consider investing in an exchange-traded fund (ETF) that is broadly diversified across dozens of top names.

The top AI-oriented ETF is the Global X Artificial Intelligence and Technology ETF (NASDAQ: AIQ), which was launched on May 11, 2018. It's risen 225% since its inception and outperformed the S&P 500's 144% gain and the Nasdaq's 205% gain. Should you still invest in this leading ETF today?

What does AIQ actually own?

AIQ holds 88 stocks across a wide range of industries. Its top five holdings -- which together account for 17.5% of its portfolio -- include Alibaba, Alphabet, Tesla, Oracle, and Broadcom. The IT sector accounts for 70.6% of its holdings, and 69.1% of its stocks are based in the United States.

By industry, AIQ allocates 37.6% of its portfolio to software and services stocks, 20.5% to semiconductor and semiconductor equipment stocks, and 12.5% to technology and hardware equipment stocks. But it splits the remaining 29.4% between industries that aren't as closely associated with the AI industry -- including the consumer discretionary, automotive, transportation, commercial services, financial services, and healthcare equipment industries.

AIQ says it invests "without regard for sector or geography" because the AI market "spans multiple segments" and the "most innovative companies" include "both household names and newcomers." AIQ has $5.26 billion in assets, and it charges a total expense ratio of 0.68%. That's slightly higher than the median expense ratio of 0.56% for actively managed ETFs. As of this writing, AIQ's shares are only trading a few cents above its net asset value (NAV) of $48.74 per share. It also trades at a reasonable 25.5 times its trailing earnings, compared to the S&P 500 and Nasdaq's price-to-earnings ratios of 30.8 and 32.9, respectively.

But there's a simpler ETF play on the AI market

AIQ consistently beats the market, it's well diversified, and it doesn't look expensive. But it has also underperformed another popular ETF, the Invesco QQQ Trust (NASDAQ: QQQ), ever since its inception. QQQ, which tracks the narrower (and higher-growth) Nasdaq-100 index, has rallied 252% since AIQ's first day on the market.

QQQ's top holdings include Nvidia, Microsoft, Amazon, Apple, and Broadcom. All of those stocks have plenty of exposure to the AI market, and it doesn't own a lot of AIQ's slower-growth AI-adjacent stocks. QQQ is also passively managed -- since it simply tracks the Nasdaq-100 -- and charges a lower expense ratio of 0.2%.

Is it the right time to invest in AIQ?

AIQ is a stable ETF that could stay ahead of the S&P 500 and Nasdaq, but it's over-diversified in sectors that are only slightly related to the AI market. It might attract a lot more attention than other ETFs because it's branded as an AI ETF, but buying QQQ -- which gives you plenty of exposure to the top AI names -- seems like the smarter move.

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Leo Sun has positions in Amazon, Apple, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool recommends Alibaba Group and Broadcom 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.