This Might Be the Ultimate Artificial Intelligence (AI) ETF to Buy as Tariffs Take Hold

The S&P 500 (SNPINDEX: ^GSPC) has plunged by as much as 20% since hitting a record high just two months ago. President Donald Trump enacted sweeping tariffs on all of America's trading partners last week, and many countries responded with plans for retaliatory tariffs of their own, which is stoking fears of a global trade war.

The president claims he wants to encourage companies to produce their products within American borders. This strategy might work over the long run, but it could lead to significant economic pain in the short term as businesses and consumers adjust. The stock market currently reflects that downbeat reality.

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But there are still some opportunities for investors to consider.

The iShares U.S. Tech Independence Focused ETF (NYSEMKT: IETC) is a unique exchange-traded fund (ETF) that invests exclusively in American companies with a high proportion of their production, technological capabilities, and revenue inside the U.S. It holds many of the stocks that are leading the artificial intelligence (AI) race. Here's why it might be a great buy if trade tensions persist.

Image source: Getty Images.

A tariff safe haven?

Last week, the Trump administration announced a sweeping 10% tariff on all goods coming into the United States, effective April 5. In simple terms, it means everything we import just became 10% more expensive (assuming producers pass this added cost onto consumers) -- even products that are manufactured by American companies overseas. The president also announced a series of "reciprocal tariffs" on countries that have large trade surpluses with the U.S. in order to level the playing field.

The reciprocal tariffs are much larger. Europe was hit with a 20% tariff, whereas Taiwan and China were hit with tariffs of 32% and 34%, respectively. Those figures are in addition to the original 10% tariff and any other tariffs that might already be in effect.

There was some initial panic because the majority of the world's semiconductors are fabricated by Taiwan Semiconductor Manufacturing, including the coveted AI data center chips designed by Nvidia. In other words, investors feared Trump put the entire AI boom at risk with the stroke of a pen. But, for now, he has provided an exemption for some products including semiconductors, pharmaceuticals, lumber, and energy.

Moreover, many of Nvidia's top customers might also be spared from the worst of the carnage. Companies like Microsoft, Alphabet, Oracle, and Meta Platforms primarily sell software and digital goods, which are exempt from the tariffs. Although Amazon generates most of its revenue from e-commerce, which will be partly affected, its cloud computing business is actually the biggest driver of its profits, and it also appears to be spared as things stand today.

Below is a list of holdings in the iShares U.S. Tech Independence Focused ETF that could navigate a trade war effectively, due either to exemptions or their portfolios of digital products and services:

Data source: iShares. Portfolio weightings are accurate as of April 3, 2025, and are subject to change.

The iShares ETF holds 120 different stocks, but the above list of 12 names represents 54.5% of the total value of its entire portfolio. Therefore, as things stand today, this ETF is insulated quite well from the tariff turmoil.

To be clear, that could all change because foreign countries might choose to retaliate against Trump's tariffs by targeting America's biggest tech giants. Plus, a weakening global economy isn't good for any business, even those selling software and digital services, so they could still be indirectly affected.

Further, there is the issue of business confidence. Will Microsoft, Amazon, Alphabet, Oracle, and Meta continue to spend hundreds of billions of dollars (combined) on AI data center infrastructure and chips from suppliers like Nvidia this year amid all of this economic uncertainty? The answer is simply unknowable right now.

The iShares ETF has a great track record

Tariffs were a big part of Trump's first term in office. In fact, his sweeping tariffs on steel and aluminum imports in 2018 contributed to a near-20% decline in the S&P 500 index during that year. In other words, we've been here before and the stock market is likely to recover over time if history is any guide.

The iShares U.S. Tech Independence Focused ETF was established in 2018, and it has delivered a compound annual return of 18% since then. The S&P 500 climbed by an average of just 13.3% per year over the same period, so the ETF could help investors beat the broader market over the long term.

The iShares ETF is currently down 25% from its all-time high, so it's actually underperforming the S&P 500 right now. However, I would expect the ETF to recover at a faster pace than the broader market once the dust settles, as investors realize the benefits of its portfolio construction in the face of persistent trade tensions.

But the great thing about this ETF is that it invests in dozens of extremely high-quality companies that are likely to continue doing well over the long term.

Should you invest $1,000 in iShares U.s. ETF Trust - iShares U.s. Tech Independence Focused ETF right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. 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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anthony Di Pizio has the following options: long April 2025 $105 calls on Nvidia and long April 2025 $110 calls on Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Atlassian, Mastercard, Meta Platforms, Microsoft, Nvidia, Oracle, Palantir Technologies, Salesforce, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Palo Alto Networks 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.