These 2 AI ETFs Are Ready to Crush the S&P 500 Over the Next 10 Years

Artificial intelligence, or AI, is perhaps the most transformative technology trend of our lifetimes and is creating some interesting investment opportunities. But investing in individual AI stocks isn't right for everyone, and if you're in this group, there's nothing wrong with using exchange-traded funds, or AI ETFs, to invest.

There are several ETFs in the market that track various indices of artificial intelligence stocks. But there are two main problems with most of them. First, they generally have expense ratios (fees) several times higher than you'll pay for the average technology index fund. Second, most of them invest heavily in mega-cap AI stocks.

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An alternative to the AI index funds

To be sure, there are some good reasons to invest in these companies. But you can get excellent AI exposure by simply buying the Invesco QQQ ETF (NASDAQ: QQQ).

Sure, this is a Nasdaq-100 index fund, not an "AI index fund." But you might be surprised at how much AI exposure it gives you -- and for a fraction of the cost of other AI index funds. In fact, the fund's top 10 holdings read like a "who's who" of the AI world:

• Nvidia (NASDAQ: NVDA)
• Microsoft (NASDAQ: MSFT)
• Apple (NASDAQ: AAPL)
• Broadcom (NASDAQ: AVGO)
• Amazon.com (NASDAQ: AMZN)
• Tesla (NASDAQ: TSLA)
• Meta Platforms (NASDAQ: META)
• Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG)
• Netflix (NASDAQ: NFLX)
• Palantir Technologies (NASDAQ: PLTR)

These 10 stocks are so heavily weighted in the Nasdaq-100 that they combine to make up more than 56% of the fund's assets. Plus, with a 0.20% expense ratio (compared with 0.6%-0.8% for most other AI ETFs), more of your returns will benefit you, not investment managers.

In a nutshell, the Invesco QQQ ETF could be a great choice if you primarily want to own a basket of large-cap AI stocks but don't want to be too dependent on any individual company's performance.

An AI ETF worth paying for

As you can probably tell from the last section, I'm not a big fan of paying high fees for ETFs that simply track an index, especially when their top investments are similar to those offered by lower-cost options. But the right actively managed ETF -- which aims to beat a benchmark index, not just track it -- can be worth the additional cost.

One in particular that is worth a closer look is the Ark Autonomous Technology & Robotics ETF (NYSEMKT: ARKQ). This is an ETF managed by notable tech investor Cathie Wood that invests in a few dozen stocks that could be major winners from the boom in AI and robotics technology.

Perhaps the best thing about this ETF is that is doesn't just focus on the mega caps. Wood and her team actively seek outside-the-box AI opportunities to maximize long-term return potential. And while the fund's largest position (Tesla) is indeed one of the Magnificent Seven stocks, other top holdings include Teradyne (NASDAQ: TER), Kratos Defense and Security (NASDAQ: KTOS), Aerovironment (NASDAQ: AVAV), Archer Aviation (NYSE: ACHR), and Trimble (NASDAQ: TRMB). If there are any on this list you aren't familiar with, well, that's the point.

As mentioned, the Ark Autonomous Technology & Robotics ETF has a somewhat higher fee structure than index funds, but a 0.75% expense ratio is quite reasonable for a specialized, actively managed ETF like this. While there's absolutely nothing wrong with taking the mega-cap approach to AI investing, as I mentioned earlier, if you favor a more unique approach, this could be a great fit for your portfolio.

Two great, but very different choices

Both of these ETFs are likely to perform well if the AI boom continues, and the best choice for you depends on your investment goals and risk tolerance. The Invesco QQQ ETF is likely to be the less volatile of the two, while the highly concentrated and smaller-company nature of the Ark ETF could produce sharper price swings. But both offer excellent AI exposure for reasonable prices and are worth a closer look right now.

Matt Frankel has positions in Amazon. The Motley Fool has positions in and recommends AeroVironment, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Netflix, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Broadcom, Teradyne, and Trimble and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.