1 Tech ETF to Load Up On and 1 to Avoid If You're Interested in AI Stocks

Key Points
Sector classifications exclude key AI companies from the Vanguard Information Technology ETF (VGT).
Investors interested in AI should want exposure to major cloud providers that will grow with the technology.
The Invesco Nasdaq 100 ETF isn't a pure-play tech ETF, but it contains most major tech companies.
- 10 stocks we like better than Invesco NASDAQ 100 ETF ›
There's no doubt that artificial intelligence (AI) stocks have been the talk of the stock market for the past few years. Unfortunately, the talk to begin 2026 has been a little more negative than previously because many of the world's top tech and AI-related stocks have struggled so far.
Even with the slow start to the year, now isn't the time to jump ship on AI stocks. If anything, it's time to revisit how useful ETFs can be. You can get exposure to many AI companies at once without taking on the risk that comes with investing in individual stocks.
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One of the stock market's most popular tech ETFs is the Vanguard Information Technology ETF (NYSEMKT: VGT) but there's a much better option if you're looking to invest in AI stocks.
Why VGT isn't ideal for AI exposure
To begin, it's important to look at the companies leading the way for VGT. Here are its top 10 holdings:
- Nvidia (18.04% of the ETF)
- Apple (14.33%)
- Microsoft (10.93%)
- Broadcom (4.33%)
- Micron Technology (2.35%)
- Advanced Micro Devices (1.89%)
- Palantir Technologies (1.62%)
- Cisco Systems (1.56%)
- Lam Research (1.52%)
- International Business Machines (1.44%)
Aside from Nvidia, Apple, and Microsoft accounting for over 43% of the 318-stock fund, the main issue with going with VGT for AI exposure is that it doesn't include some of the most important companies in the AI space.
VGT only includes companies from the information technology sector, but companies like Amazon, Alphabet, Meta Platforms, and Tesla are technically in different sectors because of how their businesses make most of their money. Amazon and Tesla are in the consumer discretionary sector, and Alphabet and Meta are in the communication services sector.
Don't shortchange yourself
Training and running AI models require lots of computing power, data storage, and networking, most of which is supplied by major cloud platforms. If you're going to invest in AI stocks, it's smart to have some exposure to the major cloud infrastructure providers, and VGT is missing two of the three largest platforms globally in Amazon Web Services and Google Cloud.
AWS is particularly important because it's the largest platform in the world, and thousands of businesses rely on it for their daily operations. When there's an AWS outage, countless apps and websites stop working.
Cloud aside, Alphabet is becoming an AI powerhouse with its popular generative AI tool Gemini, custom AI chips, and its ability to reach billions through Search, YouTube, and dozens of other products and services. And while some people might not think of Meta as an AI stock, it's responsible for key contributions to the development of open-source AI models that others have built apps using.
The better ETF to invest in for AI stocks
A great go-to for AI exposure is the Invesco Nasdaq 100 ETF (NASDAQ: QQQM). It mirrors the Nasdaq-100, which tracks the 100 largest nonfinancial stocks on the Nasdaq stock exchange.
Just under 60% of QQQM is in tech companies, so it's not a pure-play tech ETF like VGT. However, QQQM includes AI heavyweights like Amazon, Alphabet, Meta, and Tesla, which VGT is noticeably missing. Here are its top 10 holdings:
- Nvidia: 8.73%
- Apple: 7.35%
- Microsoft: 5.80%
- Amazon: 4.47%
- Tesla: 3.90%
- Meta Platforms: 3.60%
- Alphabet (Class A): 3.56%
- Alphabet (Class C): 3.30%
- Walmart: 3.28%
- Broadcom: 2.97%
By investing in QQQM, you'll gain exposure to all the AI hyperscalers, as well as other companies across sectors that may not be seen as AI stocks but are actively benefiting from or contributing to AI development (Walmart is a great example).
The Nasdaq-100 has averaged over 18.5% annual total returns in the past decade (QQQM was just created in 2020), outperforming the S&P 500 and tech-heavy Nasdaq Composite. I wouldn't count on this being the long-term average, but it should be well-positioned to continue growing impressively as these companies expand their reach.
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Stefon Walters has positions in Apple, Microsoft, and Walmart. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Cisco Systems, International Business Machines, Lam Research, Meta Platforms, Micron Technology, Microsoft, Nvidia, Palantir Technologies, Tesla, and Walmart and is short shares of Apple. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.