Why the iShares Expanded Tech Sector ETF (IGM) is the Best Bet to Outperform the S&P 500 in 2026

The iShares Expanded Tech Sector ETF (IGM) has long been a standout performer in the tech sector, consistently outpacing the S&P 500 over the past five years despite its higher volatility. As artificial intelligence (AI) reshapes global industries, IGM's strategic focus on AI-driven innovation and its heavy exposure to leading tech stocks position it as a compelling bet for 2026. With the AI market projected to expand into a $4–13 trillion opportunity, IGM's portfolio is uniquely poised to capitalize on this transformative wave.

Historical Outperformance and Volatility

From 2020 to 2024, IGM demonstrated a pattern of outperformance against the S&P 500, even during periods of market turbulence. In 2020, , . The gap narrowed in 2021, with IGM's 25.72% return outpacing the S&P 500's 15.09%. The ETF's resilience became even more evident in 2022, according to data. . . 21.96%) according to analysis, cementing its reputation as a high-growth, high-volatility vehicle. Over this period, far exceeded the S&P 500's average.

AI-Driven Momentum and Portfolio Composition

IGM's outperformance is increasingly tied to its exposure to AI-centric companies. As of December 2025, Nvidia Microsoft according to analysis, two of the most critical players in the AI revolution.

Nvidia's GPUs power the training of large language models (LLMs), while Microsoft's Azure cloud infrastructure enables scalable AI deployment. These weightings ensure IGM benefits directly from the explosive demand for AI hardware and cloud services.

The AI market's growth trajectory is further underscored by bold forecasts. Nvidia CEO Jensen Huang , driven by AI's adoption in industries ranging from healthcare to finance. Meanwhile, Cathie Wood of Ark Investment Management , fueled by AI-powered tools that reduce development costs and accelerate innovation. These projections highlight a structural shift in the tech sector, where AI is not just a niche trend but a foundational force.

Strategic Positioning for 2026

IGM's focus on AI and cloud computing aligns perfectly with these macroeconomic tailwinds. The ETF's top holdings, including Datadog and Confluent, are also positioned to thrive in this environment. Datadog's AI-native customers, for instance, , reflecting the rising demand for tools that monitor and optimize AI systems. Similarly, Confluent's real-time data streaming capabilities are critical for AI applications that require dynamic data inputs.

The S&P 500, by contrast, remains a broad-market index with limited exposure to AI-specific innovation. according to reports, its diversified nature dilutes the impact of AI-driven growth. IGM's concentrated bets on tech leaders and AI infrastructure create a compounding effect, amplifying returns as the sector scales.

Conclusion

The iShares Expanded Tech Sector ETF (IGM) is not just a tech ETF-it is a vehicle for capturing the AI revolution's full potential. Its historical outperformance, strategic weightings in AI pioneers like Nvidia and Microsoft, and alignment with multi-trillion-dollar growth forecasts make it a standout choice for 2026. While volatility remains a risk, the ETF's focus on innovation and compounding returns positions it to outpace the S&P 500 in an era defined by AI. For investors seeking to ride the next wave of technological disruption, IGM offers a compelling path forward.