On Nov. 30, 2022, OpenAI released ChatGPT. And it was an immediate hit. The popularity of the artificial intelligence (AI) chatbot, which had 800 million weekly users in November, spurred a historic race in the corporate world to invest incredible amounts of money to develop AI-related infrastructure, hardware, and software.
Many experts believe that AI will usher in a new era of human prosperity, essentially commoditizing intelligence and adding to global GDP. Investors should consider ways to build exposure in their portfolios. Instead of choosing individual stocks, here's one AI exchange-traded fund (ETF) to buy with $1,000 and hold forever.
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Despite owning 100 stocks, there is a high concentration among a select few
A popular way to get access to companies at the forefront of AI is to consider buying the Invesco QQQ Trust (QQQ +0.44%). This ETF tracks the performance of the 100 largest non-financial companies that trade on the Nasdaq exchange.
There are 100 stocks. However, investors should understand that there is concentration among certain businesses. The "Magnificent Seven" group combined makes up 41% of the QQQ's asset base. These are some of the most innovative companies the world has ever seen, with forward-thinking management teams and technologically advanced product and service offerings.
These businesses also give investors plenty of exposure to AI. Nvidia's graphics-processing units power AI training and inference. Alphabet's Gemini app not only has 650 million monthly active users, but the company also runs the thriving Google Cloud Platform. Amazon Web Services and Microsoft Azure also have a huge presence in the cloud computing industry.
Tesla, the sixth-largest holding, is leveraging AI capabilities to build self-driving software and robotics. And social media giant Meta Platforms uses AI to boost engagement on its apps, while also driving higher return on spend for its digital ad customers.
NASDAQ: QQQ
Key Data Points
It's a smart idea to expect returns to moderate going forward
In the past decade, the Invesco QQQ Trust has produced a total return of 558% (as of Jan. 22). Had you bought $1,000 worth of the ETF in late January 2016, you'd have $6,580 today. This translates to a wonderful 20.8% yearly gain. It's hard to complain about this.
In my view, betting on ongoing advancements within the realm of tech and AI is a smart position to take. However, investors are probably better off tempering their expectations about the prospects of Invesco QQQ Trust over the next decade, as returns might not match what was achieved the last 10 years. Nonetheless, this is still a top AI ETF to buy with $1,000 and hold forever.
