Growth investing has changed monumentally over the past 4 years, because the bulk of the gains are being driven by AI. If you want to bet on that megatrend and have some satellite picks that can perform independent of AI, look into First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL), Procure Space ETF (NASDAQ:UFO), and iShares US Aerospace & Defense ETF (BATS:ITA | ITA Price Prediction).
We’ll be digging deeper into each of these ETFs to make a case for why they can trounce the QQQ again after doing so last year. If the AI rally continues this year, I expect it to return to its roots. AI investors poured into hardware companies early on before coalescing into software companies and driving up broader tech valuations to nosebleed levels.
This year, I expect hardware stocks to outperform their software counterparts. Money is moving from hyperscalers into the AI buildout, not the other way around. AI models are yet to generate profits, so for 2026, AI hardware companies are still the best picks.
Other niche megatrends are also worth looking into, like space and military.
First Trust Nasdaq Semiconductor ETF (FTXL)
The First Trust Nasdaq Semiconductor ETF is an ETF that tracks the Nasdaq Smart Semiconductor Index. It gives you exposure to certain companies in the semiconductor sector by weighting them based on financial factors instead of market capitalization.
I like it because it is the only major chip ETF with Micron (NASDAQ:MU) as its largest holding. If you’ve been keeping tabs on the components that are seeing explosive price increases, you’re likely aware that memory prices have doubled or more in a matter of months. Higher-end RAM kits have quintupled in price. For consumers, this means more expensive computers, but you can turn it into an opportunity.
Memory and chip demand are expected to last through 2028. FTXL will be a major beneficiary of that. It is up 56% in the past year.
The expense ratio is 0.60%, or $60 per $10,000.
Procure Space ETF (UFO)
The Procure Space ETF tracks the S-Network space Index. Most major “space” ETFs rarely give you good exposure to companies that are directly involved in space operations. They’ll likely own defense contractors and dilute your space exposure, but this one is as “pure-play” as you can find.
The top holdings are Rocket Lab (NASDAQ:RKLB), Planet Labs (NYSE:PL), and AST SpaceMobile (NASDAQ:ASTS). Almost all of its top holdings are mid-sized space or satellite companies that are poised to be the biggest beneficiaries if the space rally continues.
I expect 2026 to be a great year for them, as private companies are rapidly commercializing space activities. The global space economy grew from $110 billion in 2005 to over $600 billion in 2025 and is expected to reach $1.8 trillion by 2035. Moreover, if the government is serious about building a “Golden Dome” and spends liberally on that endeavor, stocks held by this ETF will be the first to soar.
UFO is up over 80% in the past year. The expense ratio is 0.94%, or $94 per $10,000.
iShares US Aerospace & Defense ETF (ITA)
Aerospace and defense stocks are soaring due to defense spending remaining high. Bears expected the defense industry to take a hit last year, but spending cut rumors were instead met with proposals to take military spending to $1 trillion instead.
2026 could bring even more money to the defense industry as geopolitical events make lower military spending unlikely.
Either way, the ITA ETF has done exceptionally well in the past two years. It tracks the Dow Jones U.S. Select Aerospace & Defense Index, which has historically trailed the S&P 500 but has made up lost ground. ITA is up 59.6% in the past year and is already up over 7% year-to-date. I expect a continuation of momentum through the rest of the year as Eastern Europe remains unresolved, with Venezuela and the Middle East possibly heating up again.
The expense ratio to hold is just 0.38%, or $38 per $10,000.
Top Gaining Stocks
Top Losing Stocks