This Unstoppable BlackRock ETF Crushed the S&P 500 Over the Last 24 Years, and Could Do So Again in 2025

BlackRock manages more than $11.5 trillion in assets on behalf of its clients, making it the world's largest investment company. Around $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 like the S&P 500, or they can provide exposure to niche segments of the market like artificial intelligence (AI).

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

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. It was established in 2001, and it has delivered better annual returns (on average) than the S&P 500 ever since. Here's why it could beat the index again in 2025.

Image source: Getty Images.

Large holdings in some of the most dominant technology stocks

The iShares Expanded Tech 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 become leaders in AI, which helped them create significant amounts of value over the last couple of years.

Though its portfolio includes 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 weightings as of Jan. 13, 2025.

Those stocks generated an average return of 65.5% during 2024, trouncing the 23% gain in the S&P 500. In fact, all but one of them beat the S&P last year:

NVDA data by YCharts.

Nvidia stock is likely to be a top performer again in 2025 as the company ramps up shipments of its new Blackwell graphics processing units (GPUs) for data centers. They are potentially the most powerful chips in the world for developing AI models, and demand for them far exceeds 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 attractively valued right now, so there is plenty of room for upside.

Microsoft and Alphabet will further improve their own AI models this year. Plus, both companies should continue experiencing strong growth in their cloud computing segments, where they offer data center computing capacity and access to industry-leading LLMs to their business customers. 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 like Advanced Micro Devices, Palantir Technologies, Micron Technology, CrowdStrike, and more.

Beating the S&P 500 again in 2025

The iShares Expanded Tech Sector ETF has generated a compound annual return of 11% since it was established in 2001, comfortably outpacing the average annual gain of 8.5% in the S&P 500 over the same period.

However, thanks to the rise of technologies like enterprise software, cloud computing, and AI, the ETF's compound annual return has accelerated to 20.2% over the last 10 years. That crushes the 13.7% annualized gains of the S&P over the same period, and the difference is staggering when viewed in dollar terms:

Calculations by author.

While it's unrealistic to expect any fund to grow by 20% per year in perpetuity, 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 like Broadcom, AMD, and Micron.

Moreover, analysts at PwC think that AI overall will add $15.7 trillion to the global economy by 2030. A lot 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 highly likely to beat the S&P 500 convincingly yet again.

However, it's important for investors to own it as part of a diversified portfolio because there is always a risk that AI will fail to live up to expectations, which could lead to a period of underperformance for the ETF.

Should you invest $1,000 in iShares Trust - iShares Expanded Tech Sector ETF right now?

Before you buy stock in iShares Trust - iShares Expanded Tech Sector ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and iShares Trust - iShares Expanded Tech Sector ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $807,495!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of January 13, 2025

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to 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 Di Pizio has no 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.