The internet changed the world, starting back in the 1990s. Yet nobody back then could predict all the new products, services, and industries that exist today thanks to internet technology. I think a similar phenomenon will play out with artificial intelligence (AI) over the coming decades.
In other words, hot products like ChatGPT only scratch the surface of how AI will eventually impact the world.
How do you invest for the unknown? Consider casting a wide net. An exchange-traded fund (ETF) can help, giving investors exposure to many individual companies with just one ticker symbol. For AI, it doesn't get any better than the Invesco QQQ ETF (QQQ -0.57%).
Here is why it's the best AI ETF you can buy with $1,000 and hold forever.
Image source: Getty Images.
Simple, diversified AI exposure from the get-go
The Invesco QQQ is very straightforward. It tracks the Nasdaq-100 index, the top 100 companies in the broader, technology-leaning Nasdaq Composite index.
The ETF is heavy on today's technology leaders, including the "Magnificent Seven" stocks, a group of diversified megacap technology stocks. In all, the Invesco QQQ's top 10 positions include:
| Company | Allocation (percentage of the Invesco QQQ) |
|---|---|
| Microsoft | 8.57% |
| Nvidia | 8.37% |
| Apple | 8.08% |
| Amazon | 5.53% |
| Broadcom | 4.59% |
| Meta Platforms | 3.59% |
| Tesla | 3.17% |
| Netflix | 3.15% |
| Costco Wholesale | 2.81% |
| Alphabet (class A shares) | 2.43% |
Data source: Invesco QQQ ETF prospectus data.
These stocks comprise roughly half of the ETF, while an additional 91 companies make up the other half.
Want to invest in the companies powering AI? Leading AI chip companies like Nvidia and Broadcom are right there. AI is driving cloud growth, so what about them? Microsoft, Amazon, and Alphabet are the world's leading cloud service providers.
You'll also get industry leaders that can leverage AI to create value in their respective businesses. Netflix and Meta Platforms use AI to match you to the ideal content or advertisement. Tesla plans to build its business on autonomous driving technology and humanoid robotics. The list goes on.
It will evolve as the world does
The Nasdaq-100 and the Invesco QQQ aren't static; they rebalance quarterly and reconstitute annually.
Therefore, the ETF will evolve along with the world. Companies that struggle or lose their edge may become a smaller portion of the ETF, while those that thrive and grow can earn a higher allocation. If some new AI company emerges as the next big thing, it will likely become a top holding in this ETF.
The rebalancing and reconstitution process leans into the investing wisdom of watering the flowers and trimming the weeds -- leaning into the winners and cutting the losers. It's a crucial aspect of holding any investment forever because the world will change over time, so your investment strategy had better adapt if it wants to sustain success.
The ETF has proven it delivers results
The Invesco QQQ's broad technology exposure and periodic adjustments have resulted in tremendous investment returns throughout the internet age. The Invesco QQQ began trading in 1999, at the height of the infamous dot-com bubble. Yet it has outperformed the S&P 500 over its lifetime:
QQQ Total Return Level data by YCharts
It's not a free ride, though. Technology stocks can sometimes be volatile, and the Invesco QQQ has endured sharp drawdowns throughout history, including multiple drops of more than 30%. If you hold the Invesco QQQ forever, there's a realistic chance you'll experience sharp drops like these again.
History doesn't repeat, but it often rhymes. The internet ignited an era of technology-fueled growth and innovation, and the Invesco QQQ successfully translated that to tremendous investment returns. If AI does the same, the Invesco QQQ will likely make long-term investors quite wealthy over the coming decades.
