If you’re investing for a period of several years or more, it makes sense to put your money to work in some of the economy’s more innovative and fast-growing companies. As we sit in the early innings of the artificial intelligence (AI) boom, it’s clear that a lot of those companies reside in the tech sector.
Even with a fairly modest budget of just $1,000, the Vanguard Information Technology ETF(NYSEMKT: VGT) could be a great option to tap into this tech sector growth for a few reasons. In true Vanguard fashion, it’s one of the cheapest ways to get exposure to the sector with an expense ratio of just 0.09%. The fund’s shares also trade at around $757 per share (as of Jan. 5, 2026), making it simple to get started with a single share.
But the case for investing in tech goes far beyond that. Even though the sector has rallied strongly over the past few years, it’s still looking like a strong bet with the biggest innovation since the internet serving as a tailwind.
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This exchange-traded fund (ETF) tracks the performance of the MSCI US Investable Market Index (IMI)/Information Technology 25/50 index, which tracks tech companies of all sizes in the United States. While the fund currently holds more than 300 stocks, it’s market cap-weighted, which means the bigger companies get higher weightings in the portfolio.
The top three holdings are Nvidia, Apple, and Microsoft, with weightings of 16.6%, 15.3%, and 12.4%, respectively. While the number of individual holdings is high, investors should be aware that nearly half of their investments would be concentrated in just three stocks.
Despite this, there’s still meaningful exposure to semiconductors, software, and hardware. At some point, market leadership is going to shift within these subcategories. An investment in this ETF provides a way to gain exposure to the full ecosystem regardless of what’s leading at any moment.
That top-heavy concentration has been a good thing in recent years. The biggest winners in the AI revolution have been the heavy-spending megacap companies. In time, gains are likely to spread further down the chain to smaller companies and those outside the core cloud infrastructure and semiconductor spaces. For now, however, it’s still the biggest companies that investors are focused on.
In terms of the macro investment case, AI and data center capital expenditures are still viewed as positive until proven otherwise. The tens of billions of dollars that companies are committing to infrastructure development should yield continued positive results. It’s fair, however, to acknowledge some of the uncertainty that’s still present regarding the pace of spending and what the ultimate return on investment will be. If it’s not as high as expected, stocks could turn south.
The interest rate environment could potentially add another tailwind to the case. The Fed is expected to cut rates at least once or twice in 2026. Lower interest rates could ease the borrowing costs involved in that huge capital spending. Plus, tech valuations can be sensitive to changes in the discount rate. The sector doesn’t necessarily need lower rates in order to be successful, but it does help. If the markets can manage to get some combination of stable inflation, policy easing, and relatively few threats to a spike in volatility, they may be on a clear path to further share price upside.
The AI boom is still in its early innings, which means there’s still more potential upside to be captured.
While the investment case is clear, we shouldn’t ignore some of the challenges that could present themselves along the way. The fund currently trades at around 39 times earnings. That high starting point makes it difficult to earn better returns through valuation expansion since stocks are already expensive as is. If the ROI on all of that capital spending yields disappointing results, tech stock prices could also struggle.
But the case for adding tech stocks to your portfolio as part of a long-term strategy is an easy one to make. Even with a modest starting amount of $1,000, the combination of strong growth potential and time can yield big long-term results for the Vanguard Information Technology ETF.
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David Dierking has positions in Apple. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool 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.
