The artificial intelligence (AI) hype has been heating up over the past 18 months. Although AI has been around for years, recent technological advances mean that AI is still in its infancy in terms of investment potential.
Investors should expect a lot more change in the coming years, with some companies rising to prominence and others falling behind in the race, leaving many investors interested in the space wondering how to identify AI stocks that will continue to win over the long term.
Exchange-traded funds (ETFs), which are collections of individual stocks that trade under a single ticker symbol, could be the answer. The diversification they offer means there's no need to pick specific winners, a boon for investors who want to reap the benefits of artificial intelligence.
Here are two AI-related ETFs you can safely buy and hold for decades.
A wide range of proven gemstones
Invesco QQQ Trust (Nasdaq: QQQ) Though it's not marketed as an AI-focused fund, its “DNA” could be the most reliable AI ETF money can buy. Nasdaq 100The index is technology-heavy, with about 60% of its stocks coming from the technology sector. The remainder is primarily healthcare and consumer discretionary stocks.
More importantly, the ETF's major holdings are already major companies in the AI industry. Microsoft, NVIDIA, Amazonand Meta Platform Coming in at the top 5, they make up 26% of the total value. These tech giants are key players in AI-related fields such as semiconductor chips (Nvidia), cloud computing (Microsoft and Amazon), and the metaverse (Meta Platforms). This is great AI exposure from a company with a strong foundation already.
The fund has already shown good performance, with Invesco QQQ S&P 500 And that Nasdaq Composite Index In the past 10 years:
While there's no guarantee the company's strong performance will continue forever, its bets on the world's largest technology companies have paid off: These companies are already at the forefront of the AI industry, so continuing to invest in them for long-term growth seems like a good idea.
More concentrated AI funds with higher potential returns
More adventurous investors might be attracted to AI-focused ETFs. Round Hill Generative AI & Technology ETF (NYSEMKT:CHAT)Launched in May 2023, the Round Hill Generative AI & Technology ETF aims to deliver long-term outperformance by focusing on generative AI and its growth potential. The key difference between this ETF and the Invesco QQQ is that it does not track an index. The Round Hill Generative AI & Technology ETF's fund managers actively buy and sell positions on a regular basis.
The potential benefit of an actively managed fund is that smart investment decisions can bring huge profits. Currently, the fund manager is bullish on Nvidia (the ETF's largest holding at over 14%) and Microsoft (the second-largest holding at over 10%). The fund currently holds 50 stocks. The risk is that poor decisions by these managers could reduce investor profits.
So far, the Round Hill Generative AI & Technology ETF has outperformed the S&P 500 and Nasdaq Composite Index since its inception.
Actively managed ETFs often have higher fees than passively managed funds. This ETF's expense ratio of 0.75% is significantly higher than Invesco QQQ's 0.2%. The fee effectively puts the ETF on par with the Nasdaq Composite Index in terms of performance (so far). Still, if your investment returns are high enough over the long term, the high fees may not be a big deal.
Ultimately, both funds could benefit long-term investors. According to PwC projections, AI's impact on the global economy could exceed $15 trillion per year by 2030. In this scenario, investors who put money into this trend are likely to see big gains, regardless of which fund they hold.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool's board of directors. Randi Zuckerberg, former director of market development and communications at Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Meta Platforms, Microsoft, and NVIDIA. The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 Artificial Intelligence (AI) ETFs to Buy Now and Hold for Decades was originally published by The Motley Fool.
