The S&P 500 index had a stellar year in 2025, returning 16.4%, surpassing its average annual gain since its inception in 1957. However, investors who chose to invest in the Vanguard Information Technology ETF (VGT) at the beginning of the year would have earned an even higher return of 21.2%.
This Vanguard ETF focuses on companies in the information technology sector, which includes many of the AI powerhouses that have been driving the market higher in recent years. The ETF has consistently outperformed the S&P 500 since its establishment in 2004, making it a compelling investment option for those looking to capitalize on the tech sector’s growth.
The Vanguard Information Technology ETF holds a diverse portfolio of 320 stocks across 12 subsegments of the technology industry. The semiconductor subsegment is the largest, accounting for 32.4% of the ETF’s portfolio value. Companies like Nvidia, Broadcom, Micron Technology, and Advanced Micro Devices play a significant role in this subsegment, with a combined value of $7 trillion.
The ETF also has a substantial exposure to systems software, with companies like Microsoft, Palantir Technologies, Oracle, Palo Alto Networks, and CrowdStrike among its top holdings. This diversified exposure to various aspects of the AI industry has been a key factor in the ETF’s consistent outperformance.
Since the beginning of the AI boom in 2023, the stocks in the Vanguard ETF have seen significant growth, with some doubling or more in value. This strong performance is expected to continue in 2026, driven by increasing demand for semiconductor products and software services in the AI space.
The technology sector is known for its versatility and ability to adapt to changing trends. As AI continues to evolve, new technologies like quantum computing, autonomous vehicles, and robotics are likely to take center stage. The Vanguard Information Technology ETF offers investors a way to gain exposure to these emerging trends and potentially benefit from their growth.
Before investing in the Vanguard Information Technology ETF, investors should consider the recommendations of the Motley Fool Stock Advisor analyst team. While the ETF has delivered impressive returns, there may be other stocks with even greater potential for growth in the coming years.
In conclusion, the Vanguard Information Technology ETF has a strong track record of outperforming the market, and all indications point to another year of solid returns in 2026. Investors looking to diversify their portfolios and capitalize on the tech sector’s growth may find this ETF to be a valuable addition.
