S&P 500 Returns Surpassed by Vanguard Tech ETF Performance

S&P 500 delivered a 23% return in 2024, but Vanguard ETF outperformed with 32%. This trend reflects the strong performance of tech stocks, bolstered by the AI sector, influencing investor strategies going forward.

Date: 22-01-2025

AI Rating: 7

Performance Comparison and Key Players

The report indicates that in 2024, the S&P 500 delivered a return of 23%, which is impressive, but the Vanguard Information Technology ETF exceeded that with a return of 32%. This significant difference highlights the advantage of investing in technology stocks, particularly those associated with artificial intelligence (AI).

The Vanguard ETF notably includes leading technology giants like Nvidia and Broadcom, which have exhibited extraordinary price increases, with Nvidia’s stock rising over 800% in 2023, leading to a valuation of over $3.3 trillion. Broadcom also doubled in value during 2024, now valued at $1.1 trillion.

Given that Nvidia and Broadcom are top holdings in the Vanguard ETF, the weightings indicate increased exposure to these high-growth technology stocks compared to their representation in the S&P 500.

Potential for Future Growth

The report anticipates continued strong performance from AI-related stocks, with Nvidia expected to benefit from strong sales of their new Blackwell GPUs designed for data centers. Broadcom is also highlighted for its remarkable growth in AI revenue by 220% during its fiscal year 2024, driven by the demand for essential AI components.

Valuation and Growth Robustness

The Vanguard ETF’s structure allows it to capture a significant value from the rising AI market which is projected by PwC to add $15.7 trillion to the global economy by 2030. Hence, the ETF's constituents might be well-positioned for substantial returns in the near future.

However, the report contains encouragement to investors about maintaining diversification due to the inherent risks of over-dependence on AI stocks due to their volatility and the potential for underperformance if market expectations are not met.

Conclusion

The performance of the Vanguard ETF against the S&P 500 underscores the advantages of targeted investments in the technology sector, especially leveraging AI trends. Investors might find opportunities to capitalize on this strategic advantage as trends unfold in 2025.

Stocks: VGT NVDA AVGO AAPL MSFT CRM