AI trade leadership has rotated from megacaps to chip stocks to memory players.
With leadership rotating quickly, the best play might be to broadly invest in the theme, not subsectors.
Here's the ETF that I think best accomplishes this.
While there are legitimate concerns that the artificial intelligence (AI) trade is getting exhausted, I think there's still room for it to go higher.
Companies continue to commit billions of dollars to their development and are seeing big returns on their investments so far. Goldman Sachs expects total AI spending to hit $1 trillion in 2026, with roughly 60% of that in the United States.
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This suggests the AI investment cycle is far from finished. We've seen leadership within this trade cycle from hyperscalers to semiconductors to memory providers to cybersecurity. The next phase probably won't involve trying to pick the next winning theme. It could simply be exposure to the theme as a whole.
That's why I believe the Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ) is the best way to invest in AI right now.
Image source: Getty Images.
If you look at a lot of exchange-traded funds (ETFs) invested in AI stocks, they look familiar. They usually have some combination of Nvidia, Micron Technology, and Advanced Micro Devices among their top five holdings, if not their top three.
Those three stocks have unquestionably been big winners in the AI trade. But they're also all semiconductor manufacturers. Owning an ETF with big allocations to these names concentrates you in just one segment of this space. I don't think that's the right way to approach this sector right now.
The Global X Artificial Intelligence & Technology ETF only has Advanced Micro Devices among its top 10 holdings, and even then, it's just 3% of the portfolio. The fund holds 88 stocks, but it has just 33% of its assets in its top 10 holdings, one of the lowest levels you'll find among AI ETFs.
This ETF invests much more broadly across this trade, including AI, big data, software, cloud computing, and hardware stocks. That enables it to invest in the theme without making concentrated bets. If you believe that AI stocks will continue rising over time, the Global X Artificial Intelligence & Technology ETF might be the best way to play it.
Even if AI spending slows down, AI adoption isn't likely to. Companies will continue shifting their operations toward software and applications, and that alone could keep revenue and earnings growth rates looking robust.
I don't think investors are too late to invest in AI stocks. If they assume the next five years will look like the past three, they probably are. But AI is a theme that will continue to evolve for years. There's still time to get on board.
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David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Goldman Sachs Group, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.