The AI boom is spreading. These 3 ETFs may lead the next wave
The Rise of AI and Its Impact on the Stock Market
Artificial intelligence has driven one of the most significant stock market rallies in recent years, with semiconductor companies leading much of the market's gains in 2026. While chipmakers remain central to the AI ecosystem, the next phase of growth could be driven by cloud infrastructure, cybersecurity, and software companies that enable businesses to implement AI effectively.
Businesses Are Putting AI to Work
The first phase of the AI boom was largely driven by companies developing the hardware needed to train AI models. However, as AI moves from development to widespread deployment, the focus is shifting toward the infrastructure, security, and software that allow businesses to integrate AI into their operations.
Instead of simply building larger AI models, companies are now investing in:
- Cloud infrastructure to deploy AI applications
- Cybersecurity solutions to protect AI-powered systems
- Software platforms that automate tasks and improve productivity
As AI adoption continues to grow, spending is likely to expand across all areas of the technology sector. For investors, this shift creates opportunities beyond just semiconductor stocks.
First Trust Cloud Computing ETF (SKYY)
Cloud computing is becoming increasingly important as more businesses rely on cloud platforms to run AI applications. The First Trust Cloud Computing ETF (SKYY) invests in companies focused on cloud infrastructure, platforms, and services. This fund has returned 10.24% year to date and has produced a 73.21% total return over the past three years, indicating strong investor confidence in the sector.
First Trust Nasdaq Cybersecurity ETF (CIBR)
As businesses deploy AI across their operations, protecting sensitive data becomes crucial. AI is expected to increase both the volume and sophistication of cyber threats. The First Trust Nasdaq Cybersecurity ETF (CIBR) provides exposure to leading cybersecurity companies such as Palo Alto Networks, Cisco Systems, Broadcom, and Zscaler. The fund has returned 21.93% year to date and generated a 100.44% total return over the past three years, reflecting continued demand for cybersecurity solutions.
iShares Expanded Tech-Software Sector ETF (IGV)
For many businesses, the long-term value of AI will come from software that improves productivity. Rather than building AI models themselves, companies are integrating AI into existing enterprise software platforms. The iShares Expanded Tech-Software Sector ETF (IGV) offers diversified exposure to leading software companies like Microsoft, Oracle, Salesforce, and Palantir. Although the fund is down 17.42% year to date, it has delivered an impressive 279.20% total return over the past three years, highlighting the sector’s growth potential.
Which ETF is Best Positioned for the Back Half of 2026?
Each of these ETFs provides exposure to a different area of the expanding AI narrative, making them complementary rather than direct competitors. SKYY focuses on cloud computing, CIBR targets cybersecurity, and IGV provides exposure to enterprise software.
| Metric | SKYY | CIBR | IGV |
|---|---|---|---|
| Theme | Cloud Computing | Cybersecurity | Enterprise Software |
| YTD Return | 10.24% | 21.93% | -17.42% |
| 3-Year Total Return | 73.21% | 100.44% | 279.20% |
| Expense Ratio | 0.60% | 0.58% | 0.39% |
| Net Assets | $2.78B | $14.20B | $13.15B |
| # of Holdings | 65 | 45 | 115 |
CIBR appears particularly well positioned due to its strong year-to-date performance and continued demand for cybersecurity solutions. However, all three funds could benefit if enterprise AI spending continues to broaden beyond semiconductor companies during the second half of 2026.
What to Look for Going Forward
The next phase of AI growth is unlikely to be defined solely by advancements in semiconductor technology. Investors should watch for signs that businesses are increasing spending on cloud infrastructure, cybersecurity, and enterprise software as AI becomes more deeply integrated into everyday operations.
If enterprise AI adoption continues to accelerate, SKYY, CIBR, and IGV each offer diversified exposure to different parts of this trend. While risks surrounding the AI trade remain, these ETFs appear well positioned to benefit as spending expands beyond chips and into the broader economy.
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