Nvidia, Metaplatform, and Apple could help this unstoppable ETF turn $500 a month into $1 million.

Although the artificial intelligence (AI) industry is still in its infancy, investors are already seeing its incredible potential to create value. Starting in early 2023, Nvidia’s (NVDA -1.32%) Its market capitalization increased from $360 billion to $3.3 trillion, almost all of it due to a surge in sales of AI data center chips.

But the industry is evolving so rapidly that it’s difficult to identify long-term winners and losers. That’s why buying an exchange-traded fund (ETF) that holds several different AI stocks can be the best strategy for investors. The value created by AI can be delivered in multiple ways, protecting investors from significant losses if some companies fail.

iShares Extended Tech Sector ETF (IGM -0.60%) It owns virtually every top AI stock (including Nvidia), which is why it’s one of the best choices for investors of all experience levels.

Image source: Getty Images.

Package multiple popular AI stocks into one ETF

The iShares Exchange Traded Fund (ETF) has a relatively broad portfolio of 276 stocks. That’s because this isn’t specifically an AI fund. Its aim is to invest across the technology sector, in addition to the communications services and consumer discretionary sectors. It just so happens that many of the largest companies in these market segments are focused on developing AI.

Despite holding hundreds of stocks, the iShares ETF is highly concentrated. The top three positions alone account for 25.3% of the total portfolio value.

Data source: iShares. Portfolio weightings are accurate as of December 16, 2024 and are subject to change.

Meta, Nvidia, and Apple could become the three most important companies in the AI ​​space over the long term. Meta created the world’s most popular open source large-scale language model (LLM) called Llama, which has been downloaded over 600 million times. The company uses Llama to create AI features for Facebook and Instagram, but Llama also provides businesses and developers with a cost-effective way to create AI software.

Meta plans to launch Llama 4 next year, which CEO Mark Zuckerberg says could be the most advanced LLM in the entire AI industry. This is an incredible achievement since many other companies (such as OpenAI) had a head start several years ago.

Nvidia’s data center graphics processors (GPUs) are the industry’s most advanced for AI development. The company has just started shipping new Blackwell chips with significantly improved performance compared to its flagship H100, and sales are expected to increase very quickly. That’s why I think Nvidia could be one of the best-performing stocks in the technology sector next year.

Then there’s Apple, which just released its Apple Intelligence software. Several new AI features are being introduced for owners of the latest iPhones, iPads, and Mac computers. Powerful writing tools allow you to instantly summarize emails and text messages, and even proofread or completely rewrite the text content you send. Apple Intelligence also generates images, prioritizes notifications, and injects new features into the Siri voice assistant.

Apple has over 2.2 billion active devices worldwide, potentially making it the world’s largest AI access point for consumers.

Beyond the top three, the iShares ETF also owns several other top AI stocks, including Microsoft, Alphabet, Oracle, and Advanced Micro Devices.

Turn $500 a month into $1 million.

The iShares ETF has generated a compound annual return of 10.9% since its inception in 2001. But cloud computing, enterprise software, now AI.

The table below shows the potential returns investors could earn over the next 10, 20, and 30 years based on three different growth scenarios.

Calculations by the author.

It will be nearly impossible for the iShares ETF or any other fund to achieve a 20% annual return over the next 30 years. If Nvidia grew 20% every year for the next 30 years, its market capitalization would reach $783 trillion. That’s more than 20 times the size of the entire U.S. economy today, and a great example of how the law of large numbers can prevent excessive returns over long periods of time.

For example, the benchmark S&P 500 has returned an average of 10.4% since its founding in 1957 and strictly maintains the 500 best companies listed on U.S. stock exchanges.

That said, the iShares ETF could turn $500 a month into $1 million over 30 years, even if the annual return reverts to its long-term average of 10.9%. AI has incredible potential to create value and could bring even greater benefits in the coming years. Goldman Sachs predicts this technology will add $7 trillion to the global economy over the next decade, while PwC pegs the number at $15.7 trillion by 2030.

Although these estimates vary widely, they highlight just how bullish Wall Street is. But if AI doesn’t live up to the hype, stocks like Metaplatform, Nvidia, and Apple could lose much of the value they’ve created over the past few years.

As a result, investors should only purchase iShares ETFs as part of a balanced portfolio of other funds or individual stocks.