BlackRock manages more than $11.5 trillion in assets on behalf of its clients, making it the world's largest investment firm. About $3.5 trillion of that is in exchange-traded funds (ETFs) operated by its iShares subsidiary.
ETFs can hold hundreds or even thousands of individual stocks. They can track the performance of a specific index such as the S&P 500or they can provide exposure to niche segments of the market such as artificial intelligence (AI).
Currently, iShares offers more than 1,400 ETFs for investors to choose from. One of them is the iShares Expanded Tech Sector ETF(NYSEMKT: IGM)which holds a broad portfolio of 290 technology stocks. Founded in 2001, it has delivered better annual returns (on average) than the S&P 500 since then. This is why it could beat the index again in 2025.
Image source: Getty Images.
iShares Expanded Technology Sector ETF invests in companies across the technology spectrum, including those in the hardware, software, internet and media segments. It just so happens that many of those companies have also come leaders in AIwhich has helped them create significant amounts of value over the past two years.
Although its portfolio consists of 290 stocks, the ETF's top 10 positions account for 55.2% of its total value, and that list includes some of the biggest names in the AI space:
Data source: iShares. Portfolio weights as of January 13, 2025.
Those stocks produced an average return of 65.5% during 2024, beating the 23% gain in the S&P 500. In fact, all but one of them beat the S&P last year:
Nvidia stock is likely to be another top performer in 2025 as the company ramps up shipments of its new Blackwell graphics processing units (GPUs) for data centers. They are perhaps the most powerful chips in the world for developing AI models, and the demand for them far exceeds the supply.
Meta could also have another strong year. It plans to release its Llama 4 large language model (LLM), which could be the most advanced in the industry, and investors should also expect new AI features for its Facebook, Instagram, and WhatsApp platforms. Meta stock is currently attractively valued, so there is plenty of upside.
Microsoft and Alphabet will further improve their own AI models this year. Both companies should also continue to experience strong growth in their cloud computing segments, where they offer their business customers data center computing capacity and access to industry-leading LLMs. That could be a source of upside in their respective stock prices throughout the year.
Outside of its top 10 positions, the iShares ETF holds other popular AI stocks such as Advanced Micro Devices, Palantir Technologies, Micron Technology, CrowdStrikeand more.
The iShares Expanded Technology Sector ETF has produced a compound annual return of 11% since its inception in 2001, comfortably outpacing the average annual return of 8.5% in the S&P 500 over the same period.
However, thanks to the rise of technologies such as enterprise software, cloud computing, and AI, the ETF's compound annual return has accelerated to 20.2% over the past 10 years. That crushes the S&P's 13.7% annualized return over the same period, and the difference is staggering in dollar terms:
Opening Balance (2015 included)
Composite Annual Return
Final Balance (2024)
$100,000
20.2% (iShares ETF)
$629,570
$100,000
13.7% (S&P 500)
$361,081
Calculations by the author.
While it is unrealistic to expect any fund to grow 20% per year forever, the AI boom is still in its early stages. Nvidia CEO Jensen Huang estimates that tech giants will spend a total of $1 trillion upgrading their data centers over the next four years to support demand from AI developers. That will benefit his company, but the spending will also flow through to other hardware suppliers in the iShares ETF such as Broadcom, AMD, and Micron.
Furthermore, analysts at PwC think AI overall will add $15.7 trillion to the global economy by 2030. Much of that value will be created by the companies in the ETF.
If some of the top performing stocks from 2024 like Nvidia, Meta, and Broadcom continue to lead the broader market higher this year, the iShares ETF is very likely to convincingly beat the S&P 500 again.
However, it is important for investors to own it as part of a diversified portfolio because there is always a risk that AI will fail to meet expectations, which could lead to a period of underperformance for the ETF.
Before you buy stock in iShares Trust – iShares ETF Tech Sector Expanded, consider this:
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anthony DiPizio does not have a position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, CrowdStrike, Meta Platforms, Microsoft, Netflix, Nvidia, Oracle, Palantir Technologies, and Salesforce. The Motley Fool recommends Broadcom 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.
