Wall Street Says Artificial Intelligence (AI) Stocks Could Send the S&P 500 Much Higher. Here's 1 Spectacular Index Fund to Buy Now

The artificial intelligence (AI) boom has begun, and Wall Street is very bullish. Bank of America and RBC Capital Markets recently raised their year-end price targets for the S&P 500 (SNPINDEX: ^GSPC), and Goldman Sachs called the index undervalued. All three financial institutions referenced AI when discussing their decisions.

But the most bullish call comes from Capital Economics. The consultancy recently increased its 2025 price target for the S&P 500 to 6,500. That implies 46% upside over the next 18 months. Growing demand for AI was the impetus behind that upgrade.

One logical way for investors to capitalize on that trend is to buy an S&P 500 index fund.

Exposure to a broad range of blue-chip stocks

The Vanguard S&P 500 ETF (VOO 1.00%) tracks the performance of hundreds of blue-chip American businesses, many of which are using artificial intelligence (AI) in some capacity. In fact, a record 110 companies in the S&P 500 mentioned AI on their latest earnings calls. That includes the five stocks discussed below, which collectively account for about 16% of the weighted exposure of the Vanguard S&P 500 ETF.

Microsoft (MSFT 1.82%) uses AI across its broad portfolio of enterprise software. For instance, Microsoft 365 leans on AI to generate text in Word, analyze data in Excel, and create slides in PowerPoint. Microsoft Defender leans on AI to detect and prevent cyberattacks. And Microsoft Dynamics 365 leans on AI to avoid supply chain disruptions and improve efficiency across sales, marketing, and customer service.

Microsoft Azure is also the exclusive cloud provider for OpenAI. That partnership is beneficial for two reasons. First, Microsoft can indirectly monetize ChatGPT and any other products that OpenAI develops in the future. Second, Microsoft provides direct access to OpenAI's models, empowering developers to build generative AI applications.

Alphabet (GOOG 9.96%) (GOOGL 10.22%) uses AI to great effect across its digital advertising business. For instance, AI makes Google Search results more relevant, it makes YouTube content recommendations more personal, and it makes ad campaigns more performant. Alphabet is the largest ad tech company in the world, and popular web properties like Google Search and YouTube are the primary reasons for that success.

Alphabet also uses AI to great effect across its cloud computing business. Industry experts have recognized Google Cloud Platform as a leader in AI infrastructure, conversational AI platforms, and AI-powered document analytics, and the company recently introduced a slate of generative AI capabilities.

Amazon (AMZN 3.43%) uses AI to forecast retail sales and optimize supply chains, to engage shoppers with product recommendations, and to streamline logistics with fulfillment robots and delivery drones. And its cloud computing business, Amazon Web Services (AWS), is the epicenter of its AI innovation.

AWS offers a broader and deeper portfolio of AI and machine learning services than other cloud providers, and consultancy Gartner recently recognized the company as a leader in cloud AI developer services. But AWS recently launched two new products designed to capitalize on the growing demand for generative AI software. The first is Amazon Bedrock, a service that helps clients build generative AI applications. The second is Amazon CodeWhisperer, a service that uses generative AI to streamline software development by automating portions of the code writing process.

Nvidia (NVDA 6.18%) graphics processing units (GPUs) are the gold standard in AI infrastructure, but the company is truly formidable because it offers a full AI compute platform. Since inventing the GPU, Nvidia has delved further into data center hardware, adding high-performance networking solutions and central processing units to its portfolio. The company has also branched into AI cloud services and subscription software. In short, Nvidia is a one-stop shop for AI computing.

Tesla (TSLA -1.11%) is a frontrunner in the race to build a fully autonomous vehicle. With more autopilot-enabled cars on the road than any other automaker, the company has more autonomous driving data than its competition. That advantage hints at more advanced software, because data is the cornerstone of AI.

Tesla also has an advantage in AI hardware. According to CEO Elon Musk, the in-car supercomputer that runs its full self-driving software is "the most efficient inference computer in the world."

The S&P 500 has been a reliable investment throughout history

Many Wall Street analysts believe AI stocks will drive the S&P 500 higher in the coming months, but patient investors have an even more compelling reason to buy an S&P 500 index fund like the Vanguard S&P 500 ETF. The index has produced a positive return over every rolling 20-year period since its inception in 1957, and it returned a total of 1,690% over the last three decades, or nearly 10.1% annually.

In short, the S&P 500 has been a reliable moneymaker throughout history, and there is no reason that should change in the future.