The S&P 500 (SNPINDEX: ^GSPC) has advanced by 35% year to date, notching more than four dozen record highs in the process. Factors contributing to that upside include enthusiasm about artificial intelligence (AI), strong corporate earnings, and the Federal Reserve's pivot to interest rate cuts.
More recently, stocks have surged on expectations that President-elect Donald Trump will improve the environment for businesses by cutting corporate tax rates and reducing regulation. Tom Lee, head of research at Fundstrat Global Advisors, expects the stock market's momentum to continue through the end of the decade.
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Specifically, Lee believes the S&P 500 will hit 15,000 by 2030. That would be a 152% increase from its current level of 5,950, requiring an annualized growth rate of 16.7% over the next six years. His prediction is based on the assumption that technology stocks will shine as businesses lean on AI to offset the impact of a global labor shortage he estimates will reach 80 million workers by 2030.
Investors can gain exposure to that potential upside by simply purchasing a low-fee S&P 500 index fund like the Vanguard S&P 500 ETF (NYSEMKT: VOO).
The Vanguard S&P 500 ETF provides heavy exposure to AI stocks
The Vanguard S&P 500 ETF tracks the performance of the index, which has as its components 500 of the largest public U.S. companies, including growth stocks and value stocks from every market sector. Like the benchmark index, the exchange-traded fund is now heavily weighted toward the technology sector, which includes an array of companies well positioned to benefit from artificial intelligence.
The 10 largest holdings in the Vanguard S&P 500 ETF by weight are:
Several of these are already major players in the AI economy. For instance, Amazon, Microsoft, and Alphabet's Google are the three largest public cloud infrastructure providers worldwide, and collectively account for more than 60% of cloud infrastructure spending. That leaves them well positioned to benefit as businesses seek processing power to support their AI systems.
Similarly, Nvidia is the market leader in data center accelerators and AI networking gear, and it has a durable competitive advantage thanks to its CUDA software platform. Broadcom is the leader in networking chips and application-specific integrated circuits (ASICs), two markets expected to grow quickly due to rising demand for AI infrastructure.