Forget Warren Buffett's Favorite Index. This Artificial Intelligence ETF Could Potentially Turn Just $500 Per Month Into $156,000 Over 10 Years.

Billy Duberstein, The Motley Fool

Sun, Jun 1, 2025, 12:15 PM 6 min read

• Warren Buffett has long touted the virtues of average investors investing in an S&P 500 index fund.

• However, this sector-specific ETF has crushed the S&P over the past decade.

• Given its diverse exposure to key AI and automation trends, it could very well repeat in the decade ahead.

• 10 stocks we like better than iShares Trust - iShares Semiconductor ETF ›

Warren Buffett has long touted the virtues of investing in a low-cost index fund that tracks the S&P 500 index. The thinking behind this recommendation is that an S&P 500 index fund will track the broader market, delivering low-risk, average returns with low costs.

But there are also sector-specific exchange-traded funds (ETFs) that offer exposure to specific sectors. And while Buffett is more modest in picking specific sectors to win, it seems likely that the technology sector will, over the long run, outperform.

After all, technology is making its way into more and more of our daily lives, through smartphones, cloud computing, and now artificial intelligence. The sector, with its high technical and capital barriers, has also generally produced high margins in recent years.

Within the technology sector, one subsector has outperformed all others.

Over the past 10 years, the overall S&P 500 has performed quite well, with an annualized return of 10.7%. That has been a really great decade, outperforming the market's long-term average.

A lot of those returns have been powered by technology companies. The QQQ Trust, an ETF that aims to mirror the Nasdaq 100 index, which in itself is a proxy for the technology sector, has vastly outperformed the broader market, with a 16.7% annualized return over the past decade.

But within technology, which subsector has performed even better? Semiconductors. Over the past 10 years, the semiconductor sector, as defined in the iShares Semiconductor ETF (NASDAQ: SOXX), has compounded at a stunning 20% annualized rate.

That level of compounding tops even the 19.9% rate at which Warren Buffett's conglomerate, Berkshire Hathaway, has compounded -- although Berkshire has impressively grown at that average rate over a whopping 60 years!

What kind of difference does a 20% rate make versus a 10.7% rate? At these levels, a mere $500 monthly contribution to the iShares Semiconductor ETF over 10 years would increase to an astounding $155,906 -- 2.6 times the amount of money contributed. That compares with just $98,941 if invested in the S&P 500 for a similar length of time.