BlackRock It manages more than $11.5 trillion in assets on behalf of clients, making it the world's largest investment firm. About $3.5 trillion of that is invested in exchange-traded funds (ETFs) operated by its iShares subsidiary.
ETFs can hold hundreds or even thousands of individual stocks. They can track the performance of specific indexes, e.g. S&P 500 Indexor they can provide exposure to market segments, such as artificial intelligence (AI).
Currently, iShares offers more than 1,400 ETFs for investors to choose from. one of them is iShares Extended Technology Sector ETF (NYSE: IGM)holds a broad portfolio of 290 technology stocks. It was founded in 2001, and since then it has delivered better annual returns (on average) than the S&P 500. Here's why it could outperform the index again in 2025.
The iShares Expanded Tech Sector ETF invests in companies across the technology spectrum, including those in hardware, software, internet and media. As it happens, many of these companies have also become leaders in artificial intelligence, which has helped them create a lot of value over the past few years.
Although its portfolio includes 290 stocks, the ETF's top 10 positions account for 55.2% of its total value, and the list includes some of the best-known companies in the artificial intelligence space:
| in stock | iShares expands technology sector ETF portfolio weights |
|---|---|
| 1. NVIDIA | 8.58% |
| 2. meta platform | 8.53% |
| 3. apple | 8.36% |
| 4. Microsoft | 8.21% |
| 5. Broadcom | 5.84% |
| 6. Alphabet Class A | 4.83% |
| 7. Letter C Class | 3.96% |
| 8. Netflix | 2.73% |
| 9. salesperson | 2.32% |
| 10. Oracle | 1.88% |
Data source: iShares. Portfolio weights as of January 13, 2025.
These stocks will return an average of 65.5% in 2024, well below the S&P 500's 23% gain. In fact, all but one stock outperformed the S&P 500's average return last year:
Nvidia's stock could become a top performer again in 2025 as it ramps up shipments of its new Blackwell graphics processing units (GPUs) for use in data centers. They are probably the most powerful chips in the world used to develop artificial intelligence models, and demand for them far exceeds supply.
Meta is also likely to have another strong year. The company plans to release the Llama 4 language model (LLM), which may be the most advanced in the industry, and investors should also look forward to new AI features for its Facebook, Instagram and WhatsApp platforms. Meta stock is currently attractively valued, so there's plenty of upside left.
Microsoft and Alphabet will further refine their AI models this year. Additionally, both companies should continue to see strong growth in their cloud computing segments, offering enterprise customers data center computing capabilities and industry-leading LL.M. programs. This could be a source of gains in their respective share prices throughout the year.
In addition to its top 10 holdings, the iShares ETF also holds other popular AI stocks, such as AMD, Palantir Technology, Micron Technology, mass strike,etc.
Since its inception in 2001, the iShares Expanded Tech Sector ETF has returned a compound annual return of 11%, far exceeding the S&P 500's average annual return of 8.5% over the same period.
However, thanks to the rise of technologies such as enterprise software, cloud computing and artificial intelligence, ETFs' compound annual returns have accelerated to 20.2% over the past decade. That crushed the S&P's 13.7% annualized gain over the same period, and in dollar terms the difference is staggering:
| Opening balance (2015 included) | compound annual return | Ending balance (2024) |
|---|---|---|
| $100,000 | 20.2% (iShares ETF) | $629,570 |
| $100,000 | 13.7% (S&P 500 Index) | $361,081 |
Author's calculations.
While it's unrealistic to expect any fund to grow 20% annually in perpetuity, the AI boom is still in its early stages. Nvidia CEO Jensen Huang estimates that the tech giant will spend a total of $1 trillion over the next four years to upgrade its data centers to meet the needs of artificial intelligence developers. That will benefit his company, but the payout will also flow to other hardware vendors in the iShares ETF, such as Broadcom, AMD and Micron.
In addition, PwC analysts believe that artificial intelligence will add $15.7 trillion to the global economy overall by 2030. Much of this value will be created by the companies in the ETF.
If 2024's top-performing stocks like Nvidia, Meta, and Broadcom continue to lead the market higher this year, the iShares ETF could very well beat the S&P 500 convincingly once again.
However, it is important for investors to hold it as part of a diversified portfolio, as there is always a risk that AI will not live up to expectations, which could cause the ETF to underperform over time.
Before you buy shares of the iShares Trust - iShares Expanded Tech Sector ETF, consider the following factors:
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Randi Zuckerberg is the former director of market development and spokesperson for Facebook, the sister of Meta Platforms CEO Mark Zuckerberg, and a board member of The Motley Fool. Suzanne Frey is an Alphabet executive and a board member of The Motley Fool. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Alphabet, Apple, CrowdStrike, Meta Platforms, Microsoft, Netflix, Nvidia, Oracle, Palantir Technologies and Salesforce. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 Microsoft calls and short January 2026 $405 Microsoft calls. The Motley Fool has a disclosure policy.
This Unstoppable BlackRock ETF Has Crushed the S&P 500 Over the Past 24 Years and Could Do It Again in 2025 Originally Posted by Motley Fool