Artificial intelligence is no longer a future theme — it is the engine driving today’s market. The Invesco AI and Next Gen Software ETF (ticker: IGPT) sits squarely at this intersection, packaging some of the world’s most influential technology companies into a single, tradeable fund. But is the pitch stronger than the performance record? Let’s dig in.

Background: Where Did IGPT Come From?

IGPT was launched on June 23, 2005 by Invesco Capital Management LLC, one of the largest independent investment management firms in the world with over $1.7 trillion in assets under management globally. When it launched, the fund carried a very different identity — it was originally known as the PowerShares Dynamic Software Portfolio, targeting broadly defined software companies.

The most consequential chapter in IGPT’s history came in August 2023, when Invesco renamed and repositioned the fund as the “AI and Next Gen Software ETF.” This wasn’t merely cosmetic. The index it tracks was changed to the STOXX World AC NexGen Software Development Index, which significantly broadened the fund’s remit to include semiconductor companies, cloud infrastructure providers, and AI-adjacent hardware businesses — not just pure-play software firms.

This strategic pivot reflected a market reality: the AI revolution is not just about software code. It runs on chips, data centres, and memory. By reorienting around revenue-weighted exposure to companies deriving more than 50% of their income from next-generation software development and adjacent technologies, IGPT carved out a differentiated position in an increasingly crowded AI ETF universe.

The fund is managed by a four-person team at Invesco: Peter Hubbard (manager since 2007), Michael Jeanette (2008), Tony Seisser (2014), and Pratik Doshi (2020), with an average tenure exceeding 13 years — a reassuring sign of continuity for a passively managed product.

What Does IGPT Actually Hold?

IGPT currently holds approximately 100 securities, with about 80% of the portfolio concentrated in US-listed equities and the remaining 20% in international names — most notably South Korean memory giant SK Hynix. The fund employs full replication, meaning it physically holds every constituent in the underlying index weighted by its revenue contribution.

The top 10 holdings account for roughly 54–63% of total assets, making this a meaningfully concentrated fund rather than a broad diversifier. Here is the current lineup of the largest positions:

Sector-wise, Technology dominates at roughly 70%, followed by Communication Services at around 18%, Healthcare (driven by Intuitive Surgical) near 4%, and smaller slices in Real Estate (data centre REITs like Equinix) and Industrials. What stands out is the conspicuous absence of Apple and Microsoft — two titans that dominate most tech ETFs. Their exclusion is a direct result of the revenue-weighting methodology: both companies derive a relatively smaller proportion of their revenues from qualifying “next-gen software” activities under the STOXX index rules.

Performance: The Honest Picture

IGPT’s track record is a tale of two eras. The fund has delivered an average annual return of approximately 13.5% since inception — a respectable long-run figure that comfortably beats most fixed income alternatives. But the more recent five-year picture is far less flattering, with trailing five-year annualised returns in deeply negative territory on some measures, largely because the fund suffered severe drawdowns in 2021–2022 as rate hikes crushed growth stock valuations.

The 2021 performance is worth flagging. While most technology ETFs surged on the back of mega-cap names, IGPT posted a loss of nearly 12% — a direct consequence of its exclusion of Apple and Microsoft. The 2023 AI-driven rally similarly saw the fund trail the category average by a wide margin, as the index provider’s methodology steered the portfolio away from the highest-performing AI beneficiaries like Microsoft (whose OpenAI integration drove outsized gains that year).

On the other hand, IGPT showed meaningful resilience in 2022’s brutal downturn, falling 27.7% versus the category’s 37.4% plunge — suggesting the revenue-weighting discipline provides some defensive quality during tech selloffs. And in 2025, the fund outperformed its peer category by nearly nine percentage points, its best relative showing in years, as semiconductor and AI hardware names rallied strongly.

Morningstar Assessment

Morningstar’s most recent assessment of IGPT, published in early 2026 based on a January 2026 rating date, offers a nuanced view. The fund’s Parent Pillar — which evaluates whether Invesco’s organisational priorities align with investor interests — receives a positive note, reflecting Invesco’s standing as a credible, transparent ETF manager with a long track record.

On cost, Morningstar notes that IGPT’s expense ratio places it in the second-cheapest fee quintile among peers, which is a meaningful positive. At 0.56%, the fee is not especially low in absolute terms for a passive ETF, but relative to other thematic and sector-specific technology funds, it is competitive.

However, Morningstar and other rating services have consistently flagged the fund’s index methodology as a structural concern. The STOXX NexGen Software Development Index has a history of underweighting the market’s strongest performers, resulting in persistent underperformance versus both the Nasdaq benchmark and peer technology ETFs like QQQ or VGT over most multi-year periods. Morningstar’s quantitative star ratings — based on risk-adjusted returns relative to peers — have historically sat in the two-to-three star range, reflecting average to below-average historical risk-adjusted performance within the technology category.

Key Metrics Snapshot

Is IGPT Suitable for Long-Term Investment?

This is where the analysis gets interesting — and where InvestNotBet’s editorial stance demands intellectual honesty over marketing cheerfulness.

The Bull Case

The structural argument for IGPT is compelling. Artificial intelligence, cloud computing, semiconductors, and software automation are not speculative bubbles — they are the foundational infrastructure of the next decade’s global economy. Companies in IGPT’s portfolio, from NVIDIA and AMD to Alphabet and Micron, are deeply embedded in this build-out. If you believe — as many credible forecasters do — that AI-driven productivity gains will sustain elevated earnings growth in the technology sector through the late 2020s and 2030s, then IGPT offers diversified exposure to that thesis without the concentration risk of holding individual names.

The revenue-weighting methodology, while imperfect, does introduce a quality filter: companies must derive majority revenues from the targeted activities to earn meaningful weightings. This prevents the fund from becoming a passive beneficiary of any one mega-cap’s trajectory. And the fund’s long operating history — nearly two decades — gives it a credibility and institutional track record that many newer AI ETFs simply lack.

The Bear Case

The concerns are real and should not be glossed over. IGPT has systematically underperformed its benchmark and category peers over several recent multi-year periods. The index methodology’s exclusion of Apple and Microsoft — arguably the two most important AI infrastructure investors in the world — is a structural handicap that has cost investors meaningful returns in 2021, 2023, and 2024.

The fund’s beta of approximately 1.47 means it amplifies market swings significantly. In a technology bear market, IGPT will likely fall harder and faster than a broader index fund — as the 2021 experience demonstrated starkly. The AUM of roughly $710 million, while not tiny, is well below the $3 billion average for the Technology ETF category, which can translate to wider bid-ask spreads and slightly higher real-world trading costs for retail investors.

The 0.56% expense ratio also deserves scrutiny in the context of long-term compounding. Over a 20-year holding period, fees compound against you with the same relentlessness that returns compound for you. Against QQQ (which charges 0.20%) or VGT (0.10%), IGPT imposes a meaningful cost drag — which must be offset by superior returns that the historical record has not consistently delivered.

Who Should Consider IGPT?

IGPT makes most sense as a satellite holding within a diversified portfolio — not as a core position. Investors who already hold broad market exposure through QQQ, VGT, or an S&P 500 index fund, and who want to tilt toward AI and semiconductor themes without building individual stock positions in NVIDIA, Micron, or AMD, will find IGPT a reasonable vehicle.

It is less well-suited for investors seeking a single ETF to carry the heavy lifting of their technology exposure. The structural exclusion of the market’s largest AI-adjacent companies (Apple, Microsoft) means that in many market environments, IGPT will underperform the tech benchmarks most investors implicitly compare themselves against.

For long-term investors comfortable with high volatility and a 10+ year time horizon, the case improves meaningfully. The AI infrastructure build-out is a genuine multi-decade trend, and IGPT’s portfolio of chips, cloud, and software leaders will be central to it. If the fund’s 13.5% average annual return since inception is any guide, patient investors who ignore short-term drawdowns and contribute consistently may be well rewarded — though it is worth noting that the fund’s early years (pre-2023) operated under a very different index and mandate.

Final Thoughts

IGPT is not a bad fund. It is run by a credible manager, backed by a thoughtful revenue-weighted index, and provides genuine exposure to the technologies reshaping the global economy. Its two-decade history, while marked by strategy changes, gives it a durability that many newer AI ETFs cannot claim.

But investing well means asking hard questions. Does the methodology deliver better outcomes than simpler, cheaper alternatives? The evidence suggests: not consistently. Does the expense ratio justify the active-passive hybrid approach? Only if the returns clear the hurdle — and recent multi-year data says the margin is thin.

For the conviction investor in AI and next-generation software, IGPT deserves a place on the watchlist — and possibly a modest position in the portfolio. For the investor who wants maximum long-term tech exposure with minimum friction, a combination of QQQ and targeted semiconductor exposure through SMH may still be the more efficient path.

As always: invest with conviction, not because something has a good story. Do your own research. Size positions accordingly. And never bet the house on a single theme — no matter how compelling the narrative.