The U.S. stock market has kept investors on the edge in early 2025. Increasing geopolitical tensions, election-year jitters, and President Donald Trump's tariff policies created a shaky start for the year.
But things started changing post-April. Inflation data has eased, and corporate earnings were better than expected. That combination improved investor sentiment for technology stocks.
What's driving this renewed interest in technology stocks? It is primarily artificial intelligence (AI). As demand for AI-driven innovation and cloud infrastructure grows, so does interest in the companies that power these technologies. However, for everyday investors, picking individual winners among companies with competing technologies and elevated valuations can be risky.
Exchange-traded funds (ETFs) help fill this need. Even if you have a limited budget of $500, investing in either of these two diversified tech ETFs can provide an innovative and low-risk way to build a strong long-term portfolio.
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Global X Artificial Intelligence & Technology ETF
With the pace of AI adoption rising rapidly across all walks of life and enterprises increasingly embedding AI-powered tools into core operations, many investors are understandably keen to get exposure to this multi-trillion-dollar market. The Global X Artificial Intelligence & Technology ETF (AIQ 1.17%), a passively managed ETF that tracks the Indxx Artificial Intelligence & Big Data Index, offers a less risky yet pure-play exposure to the ever-evolving AI landscape.
The Global X fund holds stakes in over 80 companies across the U.S., Europe, and Asia, including established and innovative players in areas like big data, machine learning, and AI. The holdings include top-notch players such as Nvidia, Microsoft, Palantir Technologies, ASML, and Baidu. It is well-diversified across the AI value chain, with exposure to hardware, software, and platform players in both the U.S. and international markets. The ETF is market-cap-weighted, meaning that larger companies have a greater influence on its performance.
The fund's expense ratio (the annual percentage of funds that are used to cover the ETF's operational costs) of 0.68% is higher than the average expense ratio of index ETFs. However, this is justified since the ETF tracks a thematically constructed index, is rebalanced semi-annually, and involves multiple international holdings. With $3.45 billion in assets under management (AUM), the ETF is also significantly liquid.
Considering its numerous advantages, Global X Artificial Intelligence & Technology ETF may prove to be an excellent way for risk-averse long-term investors to invest $500 in AI.
VanEck Semiconductor ETF
Going hand in hand with the AI boom is the insatiable demand for underlying AI-optimized hardware infrastructure, particularly in data centers, the automotive sector, and industrial applications. Hence, it is no surprise that semiconductor players have been some of the biggest beneficiaries of the ongoing AI revolution. While semiconductors are a cyclical industry, the upcycle has definitely been extended by several secular tailwinds.
However, suppose investors want a more diversified and less risky exposure to this trend without speculating which chipmaker will be the next winner. In that case, the VanEck Semiconductor ETF (SMH 0.74%) could prove to be a powerful solution.
The VanEck fund is a pure-play semiconductor ETF tracking the performance of the MVIS US Listed Semiconductor 25 Index, a modified market-cap-weighted index focusing on 25 of the largest and most liquid U.S.-listed semiconductor companies. Although the index's performance is influenced mainly by the larger players, it also uses capping rules to limit overexposure to any single company.
Currently, companies such as Nvidia, Taiwan Semiconductor Manufacturing, ASML, Broadcom, and Advanced Micro Devices account for nearly half of the VanEck fund's total asset holdings. Subsequently, investors are gaining exposure to robust secular trends, including AI, 5G, autonomous vehicles, and edge computing. Additionally, the ETF provides exposure to prominent U.S.-listed international semiconductor companies.
SMH has around $25.2 billion in AUM and is highly liquid. It charges a very modest expense ratio of 0.35% and is a cost-effective investment vehicle.
Hence, it is evident that the VanEck fund offers an innovative and diversified way to benefit from the upside in the semiconductor industry while controlling for company-specific risks. For investors with $500 or more and a long-term mindset, the VanEck Semiconductor ETF deserves a close look.
