2 AI ETFs Set to Crush the NASDDAQ This Year

Everywhere you turn right now, someone is talking about artificial intelligence, and the stock market is delivering stellar returns. However, most of these returns have been tied to machine learning and AI companies, so if you’re an AI bull, it makes sense to focus precisely on these AI stocks.

AI ETFs can deliver very aggressive gains, and many of them have been outperforming the NASDAQ over the past two to three years. The momentum is hard to ignore.

As such, if you believe that artificial intelligence is still in the early innings of a decade-long reshaping of the global economy, then an AI ETF is the simplest way to turn that belief into bona fide portfolio fuel. You get the upside of the megatrend, the cushion of diversification, and the liquidity of a stock you can buy or sell with one click.

Here are the two ETFs to look into that can trounce the NASDAQ’s gains this year.

VanEck Semiconductor ETF (SMH)

The semiconductor sector has become synonymous with AI, as chips are the most important component for AI models today. Companies are short on compute, and massive data centers are being built to accommodate that. However, even the current build-out may not be enough for the demand many companies are seeing. Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) reported stellar earnings beats recently that stunned even AI bears.

Thus, it makes sense to have exposure here. VanEck Semiconductor ETF (NASDAQ:SMH) tracks the MVIS US Listed Semiconductor 25 Index, an equal-parts scoreboard of the largest and most liquid chip designers, foundries, and equipment makers that trade on American exchanges.

Here are its top holdings:

Every holding must derive at least half of its sales from the semiconductor value chain, so you are not diluted by software, social media, or consumer electronics. The index also screens for liquidity.

The expense ratio is very low compared to the stellar performance. You pay just 0.35%, or $35 per $10,000 invested. SMH is up 253.78% in the past five years and also has a 0.36% dividend yield as a sweetener. SMH on its own will give you substantial AI exposure as semiconductor stocks can rise in parallel with the broader AI market.

Global X Defense Tech ETF (SHLD)

The defense/AI industry is accelerating significantly, and it’d be a mistake not to have any exposure to it. The two fastest-growing AI darlings at the moment are NVIDIA (NASDAQ:NVDA) and Palantir (NASDAQ:PLTR). The first ETF on this list gives you plenty of exposure to the first company, whereas this one should give you good exposure to PLTR.

I see these defense technology stocks outperforming in 2025 due to the Trump administration making a U-turn in their spending policy concerning the Pentagon. There were murmurs of an annual 8% defense spending cut over five years early on in the administration. A few months later, the Pentagon requested $961.6 billion, with Trump proposing $1.01 trillion in spending for FY 2026. Much of that will find its way to AI companies.

Global X Defense Tech ETF (NYSEARCA:SHLD) tracks the Global X Defense Tech Index, which is a modified market-cap weighted index comprising the top 50 pure-play defense technology companies worldwide.

Here are some of its top holdings:

This ETF invests at least 80% of its net assets in the index’s securities, plus any borrowings for investment purposes.

The expense ratio here is 0.50%, or $50 per $10,000 invested. You get a 0.39% dividend yield, too.

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