The market’s rally has been fueled by AI for quite some time now, with the “Magnificent Seven” significantly outperforming the S&P 500 and accounting for much of the gains. This outperformance is highlighted by the performance of the S&P 500 Information Technology Index, which has added 24.80% year to date, much higher than the broader S&P 500’s 16.6% gain over the same period.

But this dominance has also sparked a debate on Wall Street, as stretched valuations and AI-bubble fears prompt investors to rethink exposure.

However, per BlackRock, AI is expected to remain a dominant market force in 2026, as quoted on Reuters. At the same time, the firm cautions that increased speculative trading and rising leverage could make the path ahead volatile.

As per Helen Jewell, CIO of fundamental equities EMEA at BlackRock, AI-linked investments may continue to generate strong returns, but intermittent concerns over valuations and the sector’s outlook could lead to bouts of heightened volatility, according to the abovementioned article.

As of Nov. 21, 2025, the Mag 7 saw third-quarter earnings rise 28.3% year over year on 18.1% higher revenues, compared with 94.8% of S&P 500 companies reporting 15.6% earnings growth on 8.3% higher revenues. The outlook for the Mag 7 remains strong, with Wall Street analysts raising earnings growth expectations for the year ahead (Read: Mag 7 Beats S&P 500 in Q3: Buy These 3 ETFs to Tap Their Strength).

Beat Overexposure With a Diversified Playbook

AI investing is undeniably exciting, and the momentum might continue to drive market gains. However, the risk of concentrated rallies in select names makes the market vulnerable to larger drawdowns. Investing heavily in tech to capitalize on AI’s growth potential exposes investors to systemic and concentration risks, particularly as valuations climb and concerns of an AI-driven bubble rise.

Diversification, therefore, becomes especially crucial when chasing the AI boom. “Invest smart or risk getting burned” is especially true in this case, as AI-focused ETFs can deliver impressive gains but also come with heightened volatility.

By spreading investments across multiple sectors and funds, investors can capture the upside of the AI rally while avoiding the pitfalls of overconcentration. A diversified approach helps preserve long-term growth potential and reduces vulnerability to sudden market shocks, allowing investors to participate in AI’s momentum without taking on unnecessary risk.

In short, AI may keep powering strong gains but a well-diversified portfolio remains your most reliable safety net, a way to tap into AI’s upside without taking on unnecessary risk.

ETFs to Explore

Below, we have highlighted a few funds that provide diversified tech exposure.

Equal Weight Technology ETFs

Investors can consider Invesco S&P 500 Equal Weight Technology ETF (RSPT Quick QuoteRSPT - Free Report) and State Street SPDR NYSE Technology ETF (XNTK Quick QuoteXNTK - Free Report) .

S&P 500 ETFs

Investing in S&P 500 ETFs also provides broad exposure to the tech sector. With roughly 35% of the index allocated to information technology, and NVIDIA (NVDA Quick QuoteNVDA - Free Report) , Apple (AAPL Quick QuoteAAPL - Free Report) and Microsoft (MSFT Quick QuoteMSFT - Free Report) among its top holdings, the S&P 500 offers built-in diversification across major tech leaders.

Vanguard S&P 500 ETF (VOO Quick QuoteVOO - Free Report) , SPDR S&P 500 ETF Trust (SPY Quick QuoteSPY - Free Report) , iShares Core S&P 500 ETF (IVV Quick QuoteIVV - Free Report) and State Street SPDR Portfolio S&P 500 ETF (SPYM Quick QuoteSPYM - Free Report) can be considered.

Investors can also consider increasing exposure to Invesco QQQ (QQQ Quick QuoteQQQ - Free Report) . The fund has a diversified exposure, allocating about 65.05% to technology, followed by consumer discretionary and health care, with an allocation of 17.61% and 4.91%, respectively.