Here's Why You Should Buy This AI ETF Right Now and Hold for 10 Years

Key Points

• Given the incredible user interest and massive capital investment being directed to it, AI likely isn’t going anywhere.

• Investors can choose this tech-driven ETF to gain valuable exposure to the AI trend.

• The ETF's returns have been impressive in the past decade, and they could continue to provide a boost to investor portfolios.

• 10 stocks we like better than Invesco QQQ Trust ›

This November will mark the third anniversary of the release of OpenAI's ChatGPT. That was a smash success, as it became the fastest app to reach 100 million monthly active users. In March, OpenAI said that ChatGPT had 500 million weekly active users, showing that its adoption continues to increase.

We now have greater confidence that artificial intelligence (AI) isn't going away. Businesses are spending tons of capital on talent and physical infrastructure to bolster their AI capabilities, hoping to become leaders in what many think could be the next technological paradigm.

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From an investment perspective, AI can no longer be ignored. The smart money is figuring out the best way to allocate capital to gain portfolio exposure. Luckily, investors can skip trying to pick individual winners.

That's because there's a top AI exchange-traded fund (ETF) to home in on. Here's why you should buy it right now and hold for 10 years.

Image source: Getty Images.

QQQ's diversified exposure to AI

There are numerous ETFs that investors can choose from. However, the one that provides adequate exposure to the AI trend is the Invesco QQQ Trust (NASDAQ: QQQ). It contains the 100 largest nonfinancial companies that trade on the Nasdaq stock exchange. As of July 10, it had $356 billion in assets under management.

With 100 different stocks in its portfolio, investors might initially think that there's sufficient diversification. But it's important to understand that there's heavy concentration toward the top. The largest 10 positions combined make up 50.7% of the QQQ Trust. In essence, the performance of these businesses has a big influence on how the ETF fares.

Besides Costco, the other nine stocks are directly related to technological trends. And AI is increasingly becoming a more important part of their corporate strategies.

For instance, Nvidia, the top stock with a 9.4% weighting, is the poster child of the AI boom, selling powerful graphics processing units that support AI data centers.

Microsoft, Amazon, and Alphabet, the so-called hyperscalers, are developing their own chips to bolster their cloud platforms.

Tesla is another example of a top 10 holding that's betting on AI to have a profound impact on its business model. Improving its autonomous driving system certainly relies on the technology.

Monster gains and a low cost

The Invesco QQQ Trust has produced a total return of 466% in the past decade. This is significantly ahead of the S&P 500 index's 265% total return during the same period. That's a tremendous outcome that has been driven by the success of those previously mentioned companies.

The expense ratio is 0.2%. In other words, for every $1,000 invested in the Invesco QQQ Trust, only $2 goes to the ETF sponsor on an annual basis. That's a very favorable fee.

The trailing-10-year return of the Invesco QQQ Trust is phenomenal. It would be wonderful to see this performance repeat itself over the next decade, but investors would be wise to temper their expectations a bit.

Since its inception in March 1999, the ETF has generated an annualized return of 9.6%. This is still a fine result, and it could revert to the mean and match this performance from this point forward.

But maybe a more reasonable perspective as we look out to 2035 is to expect the Invesco QQQ Trust to be somewhere in the middle of its long-term average and the annualized 18.9% it registered over the past decade. It would be hard to argue with that result, which makes this AI ETF a smart buy-and-hold candidate.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Neil Patel has positions in Invesco QQQ Trust. The Motley Fool has positions in and recommends Alphabet, Amazon, Costco Wholesale, Microsoft, Nvidia, and Tesla. The Motley Fool 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.