Prediction: This Unstoppable Vanguard ETF Will Beat the S&P 500 Again in 2025

Apple, Nvidia, and Microsoft stand as the three largest companies globally, boasting a total market value of $10 trillion. All three companies are leaders in the information technology sector, which is essential for creating the hardware and software used in devices ranging from personal computers to the internet.

Last year, the S&P 500 index provided a return of 23%. In contrast, if you had invested in the Vanguard Information Technology ETF (VGT -2.71%), you would have enjoyed a higher gain of 29%. This substantial difference highlights how this investment option has consistently outperformed the S&P 500 for many years.

This trend is set to continue, and I believe the Vanguard ETF will outperform the S&P 500 once again in 2025.

Significant Investment in Top Tech Stocks

The Vanguard ETF diversifies investments across the information technology sector, covering 12 segments such as semiconductors, software systems, technology hardware, and application software. The semiconductor segment accounts for the largest share, making up 27% of the ETF's total value.

Nvidia, in particular, has gained over $3 trillion in market capitalization due to the growing demand for its artificial intelligence (AI) chips for data centers. Similarly, Broadcom joined the trillion-dollar club last year, thanks to remarkable stock price increases.

A significant highlight is that, despite the ETF comprising 316 different stocks, a staggering 44% of its total value is derived from just three companies—Apple, Nvidia, and Microsoft. The ETF's top 10 holdings include other prominent names in the AI industry:

Stock	Portfolio Weighting
1. Apple	16.82%
2. Nvidia	13.88%
3. Microsoft	13.33%
4. Broadcom	4.23%
5. Salesforce	1.97%
6. Oracle	1.71%
7. Cisco Systems	1.48%
8. Accenture	1.47%
9. International Business Machines	1.45%
10. ServiceNow	1.29%

These top holdings saw an average return of 50.8% in 2024, significantly contributing to the Vanguard ETF's impressive performance compared to the S&P 500.

Recently, Apple has unveiled its Apple Intelligence software for new devices, incorporating several AI features that enhance how users interact with their devices. Furthermore, Apple is reportedly exploring the potential of producing humanoid robots, aiming to tap into the valuable robotics market within the AI sector.

Nvidia continues to dominate the AI hardware sector with its top-tier GPUs tailored for data centers. The company is set to launch its innovative Blackwell GPUs, which could become essential for AI development, and Microsoft and Oracle are expected to be major customers.

The Vanguard ETF is known for its low management fees, currently sitting at only 0.09%. For investors, this means that a $10,000 investment incurs an annual fee of merely $9, a very reasonable cost for the strong performance expected from its high-quality assets.

Why the Vanguard ETF Will Outperform the S&P 500 in 2025

It's important to note that the Vanguard ETF has a proven track record of outperforming the S&P 500, boasting a compound annual return of 13.6% since its inception in 2004. This is notably higher than the S&P 500's average annual return of 10.4% over the same period.

The power of compounding is profound, as illustrated by comparing the growth of investments over time:

Starting Balance (2004)	Compound Annual Return	Balance (End of 2024)
$100,000	13.6% (Vanguard ETF)	$1,281,051
$100,000	10.4% (S&P 500)	$723,404

AI innovation is poised to create substantial growth in the holdings of the Vanguard ETF. Major companies such as Microsoft, Amazon, Meta Platforms, and Alphabet are gearing up to invest billions in AI infrastructure and technology in 2025, with a significant portion flowing to suppliers like Nvidia and Broadcom.

Both Microsoft and Oracle are experiencing rampant demand for their AI data centers, which should support strong revenue increases and profitability going forward.

The introduction of new features in Apple Intelligence may also prompt an upgrade cycle for Apple devices in 2025. This could help revitalize Apple's sales growth, which has faced challenges in recent years.

It’s crucial for investors to recognize that the AI revolution is just beginning. While the Vanguard ETF shows significant potential to beat the S&P 500 in 2025, investors should consider diversifying their portfolios with other funds or stocks to manage risk effectively.

John Mackey, former CEO of Whole Foods Market, is a board member of a prominent investment firm. Randi Zuckerberg, a former executive at Meta Platforms, is also a board member. Additionally, Suzanne Frey, an executive at Alphabet, holds a seat on the board. Anthony Di Pizio has no investments in the mentioned stocks. It is important to exercise due diligence when investing in stocks and ETFs.

technology, ETF, investment