The S&P 500 (^GSPC -0.25%) has delivered a compound annual return of 10.5% since it was established in 1957. It's already outperforming that mark in 2025 with a gain of 12.2% so far. However, had you invested in the Vanguard S&P 500 Growth ETF (VOOG -0.53%), you would be sitting on a return of 17.6% this year instead.
The Vanguard S&P 500 Growth exchange-traded fund (ETF) tracks the performance of the S&P 500 Growth index, which only holds 212 of the best performing growth stocks from the regular S&P 500 and ignores the rest. In other words, it assigns much higher weightings to powerhouse stocks like Nvidia, which leads to much better returns.
In fact, the Vanguard S&P 500 Growth ETF has crushed the S&P 500 every year since it was established in 2010, and with themes like artificial intelligence (AI) carrying significant momentum, here's why I predict it will beat the index again in 2026.
Image source: Getty Images.
Large holdings in America's top AI stocks
The S&P 500 Growth index chooses stocks based on factors like their momentum and the sales growth of the underlying companies. The index is rebalanced once per quarter, which means stocks that no longer fit its criteria are removed in favor of more suitable candidates. This is a key reason why it outperforms the S&P 500 so consistently.
Over the last two or three years, AI has been a key driver of market returns, which is reflected in the Vanguard S&P 500 Growth ETF's top five holdings:
|
Stock |
Vanguard ETF Portfolio Weighting |
|---|---|
|
1. Nvidia |
14.89% |
|
2. Microsoft |
7.08% |
|
3. Meta Platforms |
5.77% |
|
4. Apple |
4.90% |
|
5. Broadcom |
4.74% |
Data source: Vanguard. Portfolio weightings are accurate as of July 31, 2025, and are subject to change.
Those five stocks have a combined portfolio weighting of 37.3% in the Vanguard ETF, compared to just 26.5% in the S&P 500. That's a very important point because they have delivered an average return of 476% since the beginning of 2023, which is when the AI boom started gathering momentum. Simply put, the index or ETF that assigned them a higher weighting over that period typically outperformed.
Data by YCharts.
However, those five stocks aren't the only AI powerhouses in the Vanguard ETF. Alphabet, Amazon, Tesla, Oracle, and Palantir Technologies are also among its top 20 holdings.
The Vanguard ETF can beat the S&P 500 again in 2026
The Vanguard S&P 500 Growth ETF has delivered a compound annual return of 16.5% since its inception in 2010, handily outperforming the S&P 500, which has climbed by 13.7% per year over the same period. The 2.8 percentage-point difference might not sound like much at face value, but it made a huge impact in dollar terms thanks to the magic of compounding:
|
Starting Balance (2010) |
Compound Annual Return |
Current Balance |
|---|---|---|
|
$50,000 |
16.5% (Vanguard ETF) |
$494,150 |
|
$50,000 |
13.7% (S&P 500) |
$343,065 |
Calculations by author.
If AI stocks like Nvidia, Microsoft, Meta, and Broadcom continue to drive the market higher in 2026, the Vanguard ETF will almost certainly outperform the S&P 500 yet again. I think it's the likely outcome, because Nvidia CEO Jensen Huang estimates data center operators will spend $4 trillion on AI infrastructure and chips over the next five years.
That means hardware suppliers still have a long runway for growth, but data center operators wouldn't spend so much money if they didn't expect a return, so there might still be significant growth to come on the software side, too.
NYSEMKT: VOOG
Key Data Points
The Vanguard ETF could underperform the S&P 500 next year if there is an economic recession, or if AI fails to live up to the hype. In those scenarios, high-flying growth stocks would probably suffer sharp corrections as investors flock to the safety of cash, or even dividend stocks instead.
Although the U.S. economy appears to be moderately slowing, there is no sign of a severe downturn on the horizon, so I think the Vanguard S&P 500 Growth ETF will have another great year in 2026.
