The Motley Fool·2025-07-23 09:28Core Insights - The information technology sector is the largest in the S&P 500, with a weighting of 33.9%, driven by major companies like Nvidia, Microsoft, and Apple, which collectively have a market capitalization of $11 trillion [1] - The Vanguard Information Technology ETF (VGT) has consistently outperformed the S&P 500 since its inception in 2004, with a compound annual return of 13.7% compared to the S&P 500's 10.1% [3][13] Sector Overview - The Vanguard ETF invests across the entire information technology sector, holding 319 stocks from 12 subsegments, with semiconductors being the largest segment at 30.4% [5][6] - The top 10 holdings in the Vanguard ETF represent 58.8% of its portfolio value, all of which are involved in the AI sector [7][8] Key Companies - Nvidia, Microsoft, and Apple are the top three holdings in the Vanguard ETF, with weightings of 16.74%, 14.89%, and 13.03% respectively [8] - Microsoft is a leader in AI software with its Copilot virtual assistant, while Palantir Technologies is recognized for its AI platforms that help businesses and governments [9][10] Performance Metrics - As of July 18, the Vanguard ETF had a year-to-date gain of 10.3%, outperforming the S&P 500's gain of 7.3% [14] - The ETF's ultra-low expense ratio of 0.09% makes it significantly cheaper to own compared to the industry average of 0.93% [12] Investment Strategy - An investment split between the S&P 500 and the Vanguard ETF since 2004 would have resulted in a significantly higher return, highlighting the potential benefits of including the ETF in a diversified portfolio [16]