Looking back over the past couple of years, it's safe to say that no topic has been discussed as much in the investing and business world as artificial intelligence (AI). Although AI has been around for a while, the popularity of tools like ChatGPT has pushed the technology into the mainstream.
Unsurprisingly, many people want to invest in AI stocks to take advantage of the growth opportunities, as a recent Motley Fool study confirms. And although there are dozens of great companies to choose from, I generally recommend investing in a tech exchange-traded fund (ETF) to do so.
One of the more popular tech ETFs on the market is the Vanguard Information Technology ETF (VGT 1.52%), and given its recent performance, it's easy to see why. In the past decade, VGT is up over 657%, compared to the S&P 500's 328% (as of Jan. 9). Despite that, VGT might not be the best option for those looking to capitalize on AI advancements, and I'll show you why.
Image source: Getty Images.
Technicalities that lead to shortcomings
As the name suggests, VGT tracks the performance of the information technology (tech) sector. It contains over 320 companies dealing with software, semiconductors, internet infrastructure, hardware, and plenty of other industries. Below are VGT's top 10 holdings:
| Company | Percentage of the ETF |
|---|---|
| Nvidia | 16.61% |
| Apple | 15.31% |
| Microsoft | 12.43% |
| Broadcom | 5.23% |
| Palantir Technologies (Class A) | 1.85% |
| Advanced Micro Devices | 1.73% |
| Oracle | 1.67% |
| Cisco Systems | 1.52% |
| IBM | 1.44% |
| Micron Technology | 1.33% |
Source: Vanguard. Percentages as of Nov. 30, 2025.
Aside from how concentrated VGT is in Nvidia, Apple, and Microsoft, one thing that sticks out is the companies that are not included. VGT is a pure-play tech ETF, so it excludes companies that technically belong to other sectors, though many would consider them tech companies.
For example, most people would consider Alphabet (GOOG 1.63%)(GOOGL 1.39%), Amazon (AMZN 1.34%), and Meta (META 2.41%) tech companies, yet they're technically in non-tech sectors. Alphabet is in the communication services sector because it's seen as closer to interactive media; Amazon is in the consumer discretionary sector because of its e-commerce retail business; and Meta is in the communication services sector because of its social media and networking platforms.
NYSEMKT: VGT
Key Data Points
What you're missing out on without Alphabet, Amazon, and Meta
Alphabet, Amazon, and Meta each play a valuable role in the AI ecosystem, and if you're investing in an ETF that contains AI companies, you'll want one containing them. Alphabet has the world's third-largest cloud platform in Google Cloud, a flourishing AI model in Gemini, and a network of data centers, and it's responsible for critical AI research that has helped get the technology to where it is today.
Amazon has the world's largest cloud platform, Amazon Web Services (AWS), which many consider the backbone of the AI industry, as many companies (both AI and non-AI) run their models on AWS's servers. Meta was one of the pioneers of open-source AI with its Llama models, and it's redefining how AI is used in social media and digital advertising.
Missing out on these three companies would mean missing out on major parts of the AI ecosystem's infrastructure and application segments.
What is a good alternative?
If you're interested in AI and want to invest in an AI ETF, consider the Invesco QQQ Trust ETF (QQQ 1.35%), which mirrors the Nasdaq-100 index. The Nasdaq-100 tracks the 100 largest nonfinancial companies on the Nasdaq exchange and includes many important AI companies. Below are its top 10 holdings:
| Company | Percentage of the ETF |
|---|---|
| Nvidia | 8.88% |
| Apple | 7.56% |
| Microsoft | 7.02% |
| Amazon | 5.20% |
| Tesla | 3.81% |
| Meta | 3.75% |
| Alphabet (Class A) | 3.74% |
| Alphabet (Class C) | 3.48% |
| Broadcom | 3.10% |
| Costco Wholesale | 2.21% |
Source: Invesco. Percentages as of Jan. 7, 2026.
There's a good amount of overlap between VGT and QQQ, but with QQQ, you get exposure to those three key companies that are excluded from VGT.
QQQ isn't the pure-play tech ETF that VGT is, but the tech sector is 64% of the ETF, and it contains the big players in the sector. It lets you take advantage of AI growth while having a hedge from other sectors.
