Meet the BlackRock ETF, with 39.2% of its portfolio invested in Broadcom, Nvidia, Amazon, and Microsoft

BlackRock is the world’s largest asset manager, with $11.5 trillion in client funds under its supervision. Of that amount, about $3.3 trillion is held in exchange-traded funds (ETFs) managed by the company’s iShares subsidiary.

Investors can passively own hundreds or even thousands of stocks by purchasing just a handful of different ETFs. This is especially useful if investors want exposure to new industries such as artificial intelligence (AI), as it can be difficult to determine which individual stocks will be long-term winners and losers. The late Vanguard founder John C. Bogle once said, “Don’t look for a needle in a haystack, just buy a haystack!”

iShares currently offers over 1,400 different ETFs. One of them is the iShares US Tech Independent Focused ETF. (IETC -1.99%)more than a third of its portfolio (by value) is invested in four AI leaders.

Image source: Getty Images.

The easy way to invest in the AI ​​revolution

As the name suggests, the iShares U.S. Technology Independence ETF invests in companies that help the United States achieve technological independence. In other words, companies that source a high percentage of their revenue, production, and technology within U.S. borders.

With most of the country’s biggest tech companies focused on AI, this ETF is a good proxy for what could be a once-in-a-generation technological revolution, and it has the returns to prove it (more info) here) later).

The ETF holds 117 different stocks, but its top 10 holdings are star-studded with popular AI stocks. The top four companies in particular are now widely considered to be leaders in AI hardware and software.

Data source: iShares. Portfolio weightings are accurate as of January 2, 2025 and are subject to change.

Broadcom makes custom AI accelerators (a type of AI chip) for data centers on behalf of tech giants like Alphabet, which tech giants use to develop powerful AI models. The company also makes industry-leading data center networking equipment, including Tomahawk and Jericho switches, which control the rate at which information is transferred between chips and devices. Broadcom stock more than doubled in 2024 on the back of a staggering 220% increase in AI revenue.

Despite Broadcom’s advances, Nvidia’s data center graphics processing units (GPUs) remain by far the most popular chips for AI development. The company just started shipping new Blackwell GPUs, which offer up to 30x more performance than previous Hopper GPUs (like the H100) and outperform the competition. Nvidia is scheduled to end its 2025 fiscal year at the end of this month with revenue expected to reach $128.6 billion, representing 112% growth compared to fiscal 2024.

Then there’s Amazon and Microsoft, which are Nvidia’s biggest customers. The company’s cloud divisions, Amazon Web Services (AWS) and Microsoft Azure, are building centralized AI data centers powered by GPUs and lending their computing power to developers who use them to create AI software. . Additionally, AWS and Azure offer off-the-shelf large-scale language models (LLMs) from leading third parties such as Anthropic and OpenAI that developers can use to speed up their AI software projects. Amazon and Microsoft are also integrating AI into every corner of traditional business, and both companies have developed their own virtual assistants and chatbots that rival the likes of ChatGPT.

Beyond the top 10, the iShares ETF also owns a number of popular AI stocks, including Metaplatform, Palantir Technologies, Advanced Micro Devices, and Micron Technology.

iShares ETF is currently delivering great returns

Since its inception in 2018, the iShares ETF has delivered a compound annual return of 20.6%, beating the S&P 500’s average annual return of 13.8% over the same period.

Because the iShares ETF focuses on a small number of stocks, it is not designed to be a complete portfolio on its own, which contributes to its volatility. However, adding it to an existing diversified portfolio can provide notable benefits.

If you invested $50,000 in the S&P 500 in 2018, its value would now be $123,585. However, if you invested 70% of that in the S&P 500 and the remaining 30% in the iShares ETF, that $50,000 would now be worth $141,166.

It is difficult for any fund to consistently deliver annual returns of 20% or more, as eventually the law of large numbers will catch up. Let’s take Nvidia as an example. It took the company 30 years to accumulate its current valuation of $3.5 trillion, but if it grows 20% every year for the next 30 years, it will be worth more than $830 trillion.

The total wealth held by all humans on Earth was about $450 trillion at the end of 2022, according to UBS, so it’s hard to imagine Nvidia’s valuation reaching such dizzying heights.

That said, the AI ​​boom has legs. Nvidia CEO Jensen Huang predicts that data center operators will spend $1 trillion over the next four years on infrastructure upgrades to meet the demands of AI developers. Additionally, PwC believes that AI overall will add $15.7 trillion to the global economy by 2030.

So while investors shouldn’t put all their eggs in the iShares ETF, they should definitely consider adding it to their portfolio.