Nvidia’s graphics processors (GPUs) for the data center are the secret behind almost every major AI model developed to date. Demand continues to outstrip supply, and that disparity could widen with the new Blackwell GPUs, which offer a 30-fold leap in performance compared to its flagship H100. Blackwell hardware just started shipping, and Nvidia CEO Jensen Huang says demand is “insane.”

Speaking of which, Microsoft is rumored to be the biggest buyer of Blackwell GPUs so far. It allocated $20 billion to capital expenditures in its recent fiscal 2025 first quarter (ended Sept. 30), most of which went toward AI infrastructure. Microsoft rents the computing power to AI developers through its Azure cloud platform, but it also develops its own AI software like the Copilot virtual assistant.

Outside its top three positions, the Vanguard ETF holds many other popular AI stocks. They include Oracle, Advanced Micro Devices, Palantir Technologies, CrowdStrike, and more.

The Vanguard ETF has delivered a compound annual return of 13.4% since its inception in 2004, which crushes the 10.1% performance of the S&P 500 over the same period.

However, the Vanguard ETF has generated an even more impressive annualized return of 20.3% over the last 10 years, thanks to the widespread adoption of technologies like cloud computing, enterprise software, and AI. The S&P 500 is up by a rate of 13.2% over that time frame.

AI could drive a continuation of that trend for years to come. Jensen Huang believes data center operators will spend $1 trillion to upgrade their infrastructure with AI GPUs over the next five years, which will buoy the entire semiconductor industry.

Plus, Ark Investment Management founder Cathie Wood thinks AI software companies will generate $8 in revenue for every $1 they spend on chips. That could spell a whopping $8 trillion windfall spread across companies like Microsoft if Huang’s estimate proves accurate.

On the flip side, if AI fails to live up to the hype, stocks like Nvidia could lose an enormous amount of value, which could drive a period of underperformance for the Vanguard ETF. Therefore, it’s best for investors to own this ETF as part of a balanced portfolio of other funds or individual stocks with less exposure to the tech sector.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Apple, CrowdStrike, Meta Platforms, Microsoft, Nvidia, Oracle, and Palantir Technologies. 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.

1 Unstoppable Vanguard ETF to Buy With $605 During the S&P 500 Bull Market was originally published by The Motley Fool