Stocks are on fire this summer. Driven primarily by artificial intelligence (AI) and its offshoots like advanced robotics, tech stocks have rebounded sharply after a wobbly start to the year. Nvidia, for instance, is up nearly 14.9% for the year as of this writing (June 26).
Still, the most efficient way for most investors to play this trend is through a diversified exchange-traded fund (ETF). Vanguard offers a handful of growth-oriented ETFs, but one truly stands out, capturing upside potential from both the ongoing AI and healthcare revolutions.
Image source: Getty Images.
A two-decade track record of dominance
The Vanguard Growth ETF (VUG -0.18%) doesn't just beat the market -- it demolishes it. A $10,000 investment at its 2004 launch would have grown to $108,900 -- crushing the S&P 500's (^GSPC -0.10%) return of approximately $80,000 over the same period. That's not just outperformance; that's a 36% advantage that compounds into real wealth over time.
VUG Total Return Level data by YCharts
The outperformance has accelerated over the past 10 years, suggesting the Vanguard Growth ETF's strategy of owning large-cap growth leaders continues to work in today's winner-take-all economy. With an expense ratio of just 0.04% -- compared to 0.93% for similar funds -- investors keep more of their returns where they belong: in their accounts.
AI dominance at your fingertips
Look at the top holdings, and you'll see why the Vanguard Growth ETF has thrived. Microsoft commands 11.3% of the portfolio, giving investors massive exposure to the company powering ChatGPT through its OpenAI partnership. Nvidia follows at 10.3%, representing the undisputed leader in AI chips that make large language models possible.
But it's not just about the obvious AI plays. Apple (10.1%) is integrating AI throughout its ecosystem with Apple Intelligence. Amazon (6.3%) dominates cloud computing through AWS, where most AI workloads run. Meta Platforms (4.4%) has pivoted hard into AI, with CEO Mark Zuckerberg betting the company's future on open-source models and AI-powered products.
Even Broadcom (4%) plays a crucial AI role, designing custom chips for hyperscalers while benefiting from the networking infrastructure needed to connect thousands of GPUs. Combined with Alphabet's two share classes (5.8% total), these tech titans give investors comprehensive exposure to every layer of the AI stack.
Beyond tech: The healthcare opportunity
What separates this fund from pure technology funds is its meaningful healthcare allocation. Eli Lilly represents 2.2% of the portfolio, providing exposure to the booming obesity drug market through Zepbound and Mounjaro. With the obesity drug market projected to reach $150 billion by 2035, this position adds a completely different growth vector to the portfolio.
This diversification matters. The top 10 holdings represent 57.6% of the portfolio, giving investors concentrated exposure to market leaders across multiple sectors. The inclusion of healthcare and even Tesla (3.3%) for electric vehicle exposure creates various paths to growth.
When one sector stumbles, others can carry the portfolio forward. Best of all, this passively managed ETF automatically rebalances, allowing you to capture the next wave of winners without lifting a finger.
The case for buying now
Despite strong performance, several factors make this ETF attractive today. First, the AI revolution is just beginning. We're in the infrastructure build-out phase, where companies are investing hundreds of billions of dollars in data centers and chips. The real productivity gains -- and profits -- come later when these investments translate into new products and services.
Second, the 0.4% yield might seem modest, but it's pure gravy on top of growth. Many growth stocks pay no dividends at all, so any income is a bonus while you wait for capital appreciation.
Finally, concentration works in your favor here. With nearly 58% of assets in the top 10 holdings, you're not paying for hundreds of also-rans. You own the market leaders -- companies with the scale, profits, and competitive moats to keep winning.
For investors seeking growth exposure without the risk of picking individual winners, the Vanguard Growth ETF offers the perfect solution. You get the megatrends (AI and healthcare), the market leaders (Microsoft, Nvidia, Eli Lilly), and rock-bottom costs (0.04% expense ratio) in one simple package. That's a combination worth buying and holding for the next decade.
