BlackRock manages greater than $11.5 trillion in assets on behalf of its clients, making it the world’s largest investment company. Around $3.5 trillion of that’s in exchange-traded funds (ETFs) operated by its iShares subsidiary.
ETFs can hold lots of and even hundreds of individual stocks. They will track the performance of a selected index just like the S&P 500, or they’ll provide exposure to area of interest segments of the market like artificial intelligence (AI).
Currently, iShares offers greater than 1,400 ETFs for investors to pick from. One among them is the iShares Expanded Tech Sector ETF(NYSEMKT: IGM), which holds a broad portfolio of 290 technology stocks. It was established in 2001, and it has delivered higher annual returns (on average) than the S&P 500 ever since. Here’s why it could beat the index again in 2025.
Image source: Getty Images.
The iShares Expanded Tech Sector ETF invests in firms across the technology spectrum, including those within the hardware, software, web, and media segments. It just so happens that lots of those firms have also develop into leaders in AI, which helped them create significant amounts of value over the past couple of years.
Though its portfolio includes 290 stocks, the ETF’s top 10 positions account for 55.2% of its total value, and that list includes a number of the biggest names within the AI space:
Data source: iShares. Portfolio weightings as of Jan. 13, 2025.
Those stocks generated a median return of 65.5% during 2024, trouncing the 23% gain within the S&P 500. Actually, all but one in every of them beat the S&P last 12 months:
Nvidia stock is prone to be a top performer again in 2025 as the corporate ramps up shipments of its recent Blackwell graphics processing units (GPUs) for data centers. They’re potentially probably the most powerful chips on the planet for developing AI models, and demand for them far exceeds supply.
Meta could even have one other strong 12 months. It plans to release its Llama 4 large language model (LLM), which might be probably the most advanced within the industry, and investors must also expect recent AI features for its Facebook, Instagram, and WhatsApp platforms. Meta stock is attractively valued without delay, so there may be loads of room for upside.
Microsoft and Alphabet will further improve their very own AI models this 12 months. Plus, each firms should proceed experiencing strong growth of their cloud computing segments, where they provide data center computing capability and access to industry-leading LLMs to their business customers. That might be a source of upside of their respective stock prices all year long.
Outside of its top 10 positions, the iShares ETF holds other popular AI stocks like Advanced Micro Devices, Palantir Technologies, Micron Technology, CrowdStrike, and more.
The iShares Expanded Tech Sector ETF has generated a compound annual return of 11% because it was established in 2001, comfortably outpacing the common annual gain of 8.5% within the S&P 500 over the identical period.
Nonetheless, due to the rise of technologies like enterprise software, cloud computing, and AI, the ETF’s compound annual return has accelerated to twenty.2% over the past 10 years. That crushes the 13.7% annualized gains of the S&P over the identical period, and the difference is staggering when viewed in dollar terms:
Starting Balance (2015 inclusive)
Compound Annual Return
Ending Balance (2024)
$100,000
20.2% (iShares ETF)
$629,570
$100,000
13.7% (S&P 500)
$361,081
Calculations by writer.
While it’s unrealistic to expect any fund to grow by 20% per 12 months in perpetuity, the AI boom continues to be in its early stages. Nvidia CEO Jensen Huang estimates that tech giants will spend a complete of $1 trillion upgrading their data centers over the following 4 years to support demand from AI developers. That may profit his company, however the spending may even flow through to other hardware suppliers within the iShares ETF like Broadcom, AMD, and Micron.
Furthermore, analysts at PwC think that AI overall will add $15.7 trillion to the worldwide economy by 2030. Quite a lot of that value can be created by the businesses within the ETF.
If a number of the top-performing stocks from 2024 like Nvidia, Meta, and Broadcom proceed to steer the broader market higher this 12 months, the iShares ETF is extremely prone to beat the S&P 500 convincingly yet again.
Nonetheless, it is vital for investors to own it as a part of a diversified portfolio because there may be all the time a risk that AI will fail to live as much as expectations, which may lead to a period of underperformance for the ETF.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Idiot’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Advanced Micro Devices, Alphabet, Apple, CrowdStrike, Meta Platforms, Microsoft, Netflix, Nvidia, Oracle, Palantir Technologies, and Salesforce. The Motley Idiot recommends Broadcom and recommends the next options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.
