iShares Future AI & Tech ETF

ARTY

Market cap $1.65B

The artificial intelligence (AI) boom is carrying significant momentum right now, and it's showing no signs of slowing down. A few months ago, Nvidia CEO Jensen Huang said he expects data center operators to spend as much as $4 trillion to upgrade their infrastructure to meet demand from AI developers over the next five years alone.

Artificial intelligence (AI) has been a huge catalyst for the portfolios of many investors over the past several years. Large tech companies are spending hundreds of billions of dollars to build out their AI hardware infrastructure, creating massive winners like semiconductor designer Nvidia.

ARTY offers pure, high-conviction exposure to the AI megatrend, focusing on infrastructure, chips, and software powering artificial intelligence's exponential growth. The ETF is highly concentrated in technology (83%+), with top holdings like AMD, NVIDIA, and Super Micro Computer capturing the AI value chain. Performance has been strong, outpacing the S&P 500 recently, but comes with high volatility, sector risk, and premium valuations reflecting future growth.

AI is driving rapid change, and iShares Future AI & Tech ETF is strategically positioned to capture this growth, up over 40% year to date. Top holdings like Advanced Micro Devices, NVIDIA, and Palantir are well-positioned for AI infrastructure and generative AI growth. The fund's higher expense ratio is justified by unique international exposure and strong liquidity, making it accessible for retail investors.

Investors can earn a reliable, practically risk-free annual return of up to 5% by purchasing U.S. government bonds, or they can invest in the S&P 500 (^GSPC -0.12%) index, which has delivered a compound annual return of 10.5% since its inception in 1957. But volatility is the price we pay for higher returns in the stock market, so investors will have to stomach regular sell-offs along the way, which sometimes exceed 20%.

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AI investment momentum remains strong, with ARTY ETF recovering from April lows and poised for new cycle highs by year-end. ARTY offers diversified AI exposure through blue-chip names at a reasonable 23x P/E, with double-digit long-term EPS growth and a fair PEG ratio. The ETF is concentrated in US large-cap growth and tech, carries higher volatility, and has a wide bid/ask spread—limit orders are recommended.

Investing in emerging industries like artificial intelligence (AI) can be risky. Past technology booms have taught investors that not every company survives, and picking the winners and losers isn't easy.