U.S. stock markets are in turmoil. Since the start of the year, the benchmark S&P 500 has plunged by over 11%, and the tech-laden Nasdaq-100 has dropped by over 16%, as of this writing. High-flying tech stocks, which led the potent bull market over the bulk of 2023 and 2024, have been particularly hard-hit. For instance, Nvidia, the artificial intelligence (AI) kingmaker, has seen its stock price retreat by a whopping 28% since the calendar's turn.
What's an investor to do? While a tremendous amount of uncertainty stems from President Donald Trump's global trade reset and protectionist economic policies, the core thesis behind the AI revolution remains very much intact. If anything, AI's front-runners are even better buys after the rough start to 2025. But don't worry if you're not into picking individual stocks.
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Here is one magnificent Vanguard exchange-traded fund (ETF) that's been hit hard by the administration's tariff war, but that now scans as an incredible bargain for investors with a multidecade horizon.
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A technology fund at a discount
The Vanguard Information Technology ETF (NYSEMKT: VGT) offers investors broad exposure to the U.S. technology sector at an astonishingly low cost. With an expense ratio of just 0.09%, this popular fund delivers maximum value. Investors pay just $0.90 annually per $1,000 invested, compared to $7.40 for the average comparable fund.
After the recent market correction, this tech-heavy ETF is trading approximately 23% below its 52-week high. This setup presents a rare opportunity to acquire shares of America's most innovative tech companies at valuations not seen since mid-2023, before the AI boom fully materialized.
While many investors flee technology during market downturns, historical data suggests these periods, albeit unnerving, often create the most lucrative entry points for long-term capital appreciation.
Stellar long-term performance
Despite the recent stock market pullback, this fund's long-term performance remains exemplary. Over the past 10 years, it has delivered an annualized return of approximately 19%, dramatically outpacing the S&P 500's 12.4% average annual return during the same period.
What does the fund's market-beating performance mean in concrete terms? A $10,000 investment made 10 years ago in this top Vanguard tech ETF would have grown to around $50,500 today, with dividends reinvested. This remarkable growth trajectory highlights technology's dominance in the modern economy.
The Vanguard Information Technology ETF has also demonstrated impressive resilience during previous market downturns. Following the March 2020 pandemic crash, this tech ETF recovered its losses within just three months:
Furthermore, it proceeded to deliver exceptional returns through the remainder of that year to the start of 2025. This proven ability to quickly rebound from market shocks underscores the enduring strength of its underlying holdings and the technology sector's critical role in the global macroeconomic picture.
Three powerful catalysts are coming into view
Several powerful tailwinds should continue propelling this fund for decades to come. First, AI adoption is still in its infancy. According to recent industry forecasts, the global AI market is expected to create trillions in economic value over the next 10 years. The fund's largest holding, Apple, is integrating AI capabilities across its entire ecosystem. Meanwhile, Microsoft, the fund's third-largest holding, is transforming its business through a strategic partnership with OpenAI, giving it ample exposure to this powerful catalyst.
Second, advanced robotics and automation technology represent another major growth vector for many companies in this fund. Nvidia's specialized graphics processing units (GPUs) have become the backbone of modern robotics systems, powering everything from autonomous vehicles to manufacturing robots. The integration of AI with robotics is creating powerful new opportunities across multiple sectors, with several of the fund's semiconductor holdings developing the computing platforms that will drive this revolution forward.
Third, quantum computing represents a breakthrough technology that could redefine computing as we know it. IBM and other major technology companies are making significant investments in this field that promises to solve previously impossible computational problems. The fund's exposure to leading hardware and software companies, such as IBM, positions investors to capitalize on this emerging technology.
The long view
While short-term volatility is likely to persist amid trade tensions and potential regulatory pressures, the technology sector remains the primary engine of productivity growth in the global economy. For patient investors with multidecade time horizons, this sharp sectorwide correction represents an exceptional entry point into companies transforming every aspect of how we live and work.
As much-admired investor Warren Buffett famously advised, be fearful when others are greedy, and greedy when others are fearful. With tech stocks experiencing their most significant pullback in years, now may be the perfect time to consider adding this high-powered Vanguard ETF to your long-term portfolio.
All told, the Vanguard Information Technology ETF's rock-bottom expense ratio, diversified technology exposure, and the inevitable continuation of digital transformation across all industries make it an exceedingly attractive option for growth-oriented investors willing to weather near-term volatility.
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George Budwell has positions in Apple, Microsoft, Nvidia, and Vanguard World Fund-Vanguard Information Technology ETF. The Motley Fool has positions in and recommends Apple, International Business Machines, 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.
