The biggest bulls say that artificial intelligence (AI) will fundamentally change virtually all aspects of our lives. Other people adopt a more down-to-earth perspective, claiming that AI won't bring about any meaningful changes, with the technology being evolutionary at best.
No one can accurately predict the future, especially when it comes to new technologies, the timing of adoption, and the companies and products/services they create. In the face of the uncertainty, though, one thing is certain: Investors can't ignore what's happening right in front of their eyes.
Companies are investing large sums of money into capital expenditures and human talent to work on AI projects. Investors who see the present clearly will quickly realize that they might need AI exposure in their portfolios.
Here's the smartest AI exchange-traded fund (ETF) to buy with $1,000 right now.
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Investors gain broad exposure to top tech stocks
The Invesco QQQ Trust (QQQ 2.12%) should be on investors' radar. It's a popular ETF, with $394 billion in assets under management, that tracks the performance of the largest 100 non-financial stocks that trade on the Nasdaq exchange.
If you're building adequate exposure to AI for your portfolio, the Invesco QQQ Trust has you covered. The "Magnificent Seven" stocks represent 44% of the entire ETF, indicating concentration at the top. Outside of these seven innovative businesses, the QQQ also owns notable AI enterprises, including Broadcom, Palantir, and Advanced Micro Devices.
The market has been very kind to companies investing heavy amounts of capital into AI initiatives. By owning the Invesco QQQ Trust, investors are hoping that these tailwinds continue. The beauty of this passive approach is that you can avoid trying to pick individual businesses that might be tomorrow's winners. What's more, the top holdings are also well-positioned to ride other tech-enabled secular trends, such as cloud computing, digital advertising, and digital payments, among others.
The Invesco QQQ Trust's past performance is incredible
It's hard to argue with the Invesco QQQ Trust's total return, which was 522% in the past decade (as of Oct. 9). Had you invested $1,000 in this booming ETF in October 2015, you'd have more than $6,200 today.
Besides the performance, perhaps the best part is that it won't cost investors an arm and a leg. The expense ratio is a reasonable 0.20%. There are numerous investment vehicles that charge much higher fees with poor performance.
Now, no one knows what the future holds. Returns could be better or worse going forward. Investors should think about the key factors that can impact the Invesco QQQ Trust's performance over the next decade.
In the past, stocks have benefited from several years of low interest rates, solid economic growth, huge capital inflows into passive vehicles, and the rise of world-changing tech enterprises. There's a very good chance these tailwinds will persist, providing an extremely favorable backdrop for the Invesco QQQ Trust to continue putting up impressive returns. That's the optimistic view.
A more pessimistic perspective might foresee a possible recession occurring in the near future. After all, the U.S. hasn't had a "normal" recession since the Great Financial Crisis (excluding the COVID-19 downturn). If this adverse event happened, it could force companies to drastically cut back their AI-related spending, and we might enter a bear market.
I believe the right outlook to have sits somewhere in between those two. Even as the Invesco QQQ Trust trades at record highs, it's a good idea to remain optimistic, especially about the positive impacts of technology, over the long term. Patience is rewarded in the stock market.
The Invesco QQQ Trust is the smartest AI ETF to buy with $1,000 today. It's a great way to gain immediate exposure to this powerful trend.
